NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited condensed consolidated financial statements of TechnipFMC plc and its consolidated subsidiaries (“TechnipFMC”, the “Company,” “we,” “us,” or “our”) have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and rules and regulations of the Securities and Exchange Commission (“SEC”) pertaining to interim financial information. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted. These unaudited condensed consolidated financial statements should be read together with our audited consolidated financial statements contained in our Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2020.
Our accounting policies are in accordance with GAAP. The preparation of financial statements in conformity with these accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Ultimate results could differ from our estimates.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, as well as adjustments to our financial position pursuant to a business combination, necessary for a fair statement of our financial condition and operating results as of and for the periods presented. Revenue, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the results and trends in these financial statements may not be representative of the results that may be expected for the year ending December 31, 2021.
NOTE 2. DISCONTINUED OPERATIONS
The Spin-off
On February 16, 2021, we completed our separation into two independent publicly traded companies: TechnipFMC, a fully integrated technology and service provider, and Technip Energies, a leading engineering and technology player (“Technip Energies”). The transaction was structured as a spin-off (the “Spin-off”), which occurred by way of a pro rata dividend (the “Distribution”) to our shareholders of 50.1 percent of the outstanding shares in Technip Energies N.V. Each of our shareholders received one ordinary share of Technip Energies N.V. for every five ordinary shares of TechnipFMC held at 5:00 p.m., Eastern Standard time on the record date, February 17, 2021. Technip Energies N.V. is now an independent public company and its shares trade under the ticker symbol “TE” on the Euronext Paris Stock Exchange.
In connection with the Spin-off, TechnipFMC and Technip Energies entered into a separation and distribution agreement, as well as various other agreements, including among others a tax matters agreement, an employee matters agreement and a transition services agreement and certain agreements relating to intellectual property. These agreements provide for the allocation between TechnipFMC and Technip Energies of assets, employees, liabilities and obligations attributable to periods prior to, at and after the Spin-off.
Discontinued Operations
The Spin-off represented a strategic shift that will have a major impact to our operations and consolidated financial statements, accordingly Technip Energies has been presented as discontinued operations in the consolidated statements of income, consolidated balance sheets and the consolidated statements of cash flows. Therefore, the results of Technip Energies were presented as discontinued operations for the three months ended March 31, 2021 and 2020 including the historical results of Technip Energies prior to the Distribution on February 16, 2021. Our condensed consolidated balance sheets, condensed consolidated statements of income, condensed consolidated statements of cash flows and notes to the condensed consolidated financial statements have been updated to reflect continuing operations only.
The following table summarizes the components of income from discontinued operations, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March 31,
|
|
(In millions)
|
2021
|
|
2020
|
|
Revenue
|
$
|
906.0
|
|
|
$
|
1,547.7
|
|
|
Costs and expenses
|
889.3
|
|
|
1,442.4
|
|
|
Other income and interest expense, net
|
(18.6)
|
|
|
(62.2)
|
|
|
Income (loss) from discontinued operations before income taxes
|
$
|
(1.9)
|
|
|
$
|
43.1
|
|
|
Income (loss) from discontinued operations, net of income taxes
|
$
|
(60.2)
|
|
|
$
|
(17.8)
|
|
Assets and liabilities of discontinued operations are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(In millions)
|
|
2020
|
|
Assets
|
|
|
|
Cash and cash equivalents
|
|
$
|
3,538.6
|
|
|
Trade receivables, net of allowances
|
|
1,302.7
|
|
|
Contract assets
|
|
333.5
|
|
|
Other current assets
|
|
522.0
|
|
|
Total current assets of discontinued operations
|
|
5,696.8
|
|
|
Property, plant and equipment, net of accumulated depreciation
|
|
117.1
|
|
|
Goodwill
|
|
2,512.5
|
|
|
Other assets
|
|
664.0
|
|
|
Total non-current assets of discontinued operations
|
|
3,293.6
|
|
|
Total assets of discontinued operations
|
|
$
|
8,990.4
|
|
|
|
|
|
|
Liabilities
|
|
|
|
Accounts payable, trade
|
|
$
|
1,545.1
|
|
|
Contract liabilities
|
|
3,690.4
|
|
|
Other current liabilities
|
|
885.8
|
|
|
Total current liabilities of discontinued operations
|
|
6,121.3
|
|
|
Long-term debt, less current portion
|
|
482.2
|
|
|
Operating lease liabilities
|
|
248.2
|
|
|
Other liabilities
|
|
350.9
|
|
|
Total non-current liabilities of discontinued operations
|
|
1,081.3
|
|
|
Total liabilities of discontinued operations
|
|
$
|
7,202.6
|
|
On February 16, 2021, all assets and liabilities of Technip Energies were spun-off, therefore, as of March 31, 2021, there were no assets and liabilities classified as discontinued operations.
NOTE 3. NEW ACCOUNTING STANDARDS
Recently Adopted Accounting Standards under GAAP
In August 2018, the FASB issued ASU No. 2018-14, “Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans.” This update amends ASC 715 to add, remove, and clarify disclosure requirements related to defined benefit pension and other post-retirement plans. We adopted this amendment as of January 1, 2021, which did not have a material impact on our condensed consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes to Topic 740—Simplifying the Accounting for Income Taxes.” The amendments simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. This update also improves and simplifies areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. We adopted this amendment as of January 1, 2021, which did not have a material impact on our condensed consolidated financial statements.
In January 2020, the FASB issued ASU No. 2020-01, "Investments—Equity Securities (Topic 321)," “Investments—Equity Method and Joint Ventures (Topic 323),” and “Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815,” and made targeted improvements to address certain aspects of accounting for financial instruments. This update clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, Investments—Equity Method and Joint Ventures, for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The new ASU also clarifies that, when determining the accounting for certain forward contracts and purchased options, a company should not consider whether underlying securities would be accounted for under the equity method or fair value option upon settlement or exercise. We adopted this amendment as of January 1, 2021, which did not have a material impact on our condensed consolidated financial statements.
In October 2020, the FASB issued ASU No. 2020-10, “Codification Improvements.” The amendments in this update improve consistency by amending the accounting standards codification (the “Codification”) to include all disclosure guidance in the appropriate sections and clarify the application of various provisions in the Codification by amending and adding new headings, cross referencing to other guidance, and refining or correcting terminology. We adopted this update at January 1, 2021, which did not have a material impact on our condensed consolidated financial statements.
Recently Issued Accounting Standards under GAAP
In March 2020, the FASB issued ASU No. 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848).” In addition, in January 2021, FASB issued ASU No. 2021-01, “Reference Rate Reform (Topic 848)” which clarifies the scope of Topic 848. The amendments in these updates apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The amendments in this update are effective as of March 12, 2020 through December 31, 2022. We are currently evaluating the impact of this ASU on our condensed consolidated financial statements.
In August 2020, the FASB issued ASU No. 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40)”. This update simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. The amendments in this update are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. We do not anticipate the adoption of this update to have a material impact on our condensed consolidated financial statements.
NOTE 4. REVENUE
The majority of our revenue is from long-term contracts associated with designing and manufacturing products and systems and providing services to customers involved in exploration and production of crude oil and natural gas.
Disaggregation of Revenue
Revenues are disaggregated by geographic location and contract types.
The following tables present products and services revenue by geography for each reportable segment for the three months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March 31, 2021
|
|
March 31, 2020
|
|
(In millions)
|
Subsea
|
|
Surface Technologies
|
|
Subsea
|
|
Surface Technologies
|
|
Europe, Russia, Central Asia
|
$
|
255.9
|
|
|
$
|
42.1
|
|
|
$
|
423.1
|
|
|
$
|
50.3
|
|
|
Americas
|
561.7
|
|
|
75.2
|
|
|
436.5
|
|
|
149.3
|
|
|
Asia Pacific
|
241.6
|
|
|
24.0
|
|
|
137.6
|
|
|
34.3
|
|
|
Africa
|
292.2
|
|
|
8.2
|
|
|
214.6
|
|
|
13.6
|
|
|
Middle East
|
23.8
|
|
|
74.5
|
|
|
21.8
|
|
|
50.5
|
|
|
Total products and services revenue
|
$
|
1,375.2
|
|
|
$
|
224.0
|
|
|
$
|
1,233.6
|
|
|
$
|
298.0
|
|
The following tables present revenue by contract type for each reportable segment for the three months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March 31, 2021
|
|
March 31, 2020
|
|
(In millions)
|
Subsea
|
|
Surface Technologies
|
|
Subsea
|
|
Surface Technologies
|
|
Services
|
$
|
793.4
|
|
|
$
|
32.8
|
|
|
$
|
717.5
|
|
|
$
|
56.1
|
|
|
Products
|
581.8
|
|
|
191.2
|
|
|
516.1
|
|
|
241.9
|
|
|
Total products and services revenue
|
1,375.2
|
|
|
224.0
|
|
|
1,233.6
|
|
|
298.0
|
|
|
Lease
|
11.3
|
|
|
21.5
|
|
|
19.5
|
|
|
31.5
|
|
|
Total revenue
|
$
|
1,386.5
|
|
|
$
|
245.5
|
|
|
$
|
1,253.1
|
|
|
$
|
329.5
|
|
Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, costs and estimated earnings in excess of billings on uncompleted contracts (contract assets), and billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities) on the condensed consolidated balance sheets.
Contract Assets - Contract Assets include unbilled amounts typically resulting from sales under long-term contracts when revenue is recognized over time and revenue recognized exceeds the amount billed to the customer, and right to payment is not just subject to the passage of time. Amounts may not exceed their net realizable value. Costs and estimated earnings in excess of billings on uncompleted contracts are generally classified as current.
Contract Liabilities - We sometimes receive advances or deposits from our customers, before revenue is recognized, resulting in contract liabilities.
The following table provides information about net contract assets (liabilities) as of March 31, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31,
2021
|
|
December 31,
2020
|
|
$ change
|
|
% change
|
|
Contract assets
|
$
|
1,008.7
|
|
|
$
|
934.1
|
|
|
$
|
74.6
|
|
|
8.0
|
|
|
Contract (liabilities)
|
(892.5)
|
|
|
(1,045.7)
|
|
|
153.2
|
|
|
14.7
|
|
|
Net contract assets (liabilities)
|
$
|
116.2
|
|
|
$
|
(111.6)
|
|
|
$
|
227.8
|
|
|
204.1
|
|
The increase in our contract assets from December 31, 2020 to March 31, 2021 was primarily due to the timing of project milestones.
The decrease in our contract liabilities was primarily due to completion of performance obligations for contracts, for which consideration was received in advance of the work performed during the period.
In order to determine revenue recognized in the period from contract liabilities, we first allocate revenue to the individual contract liability balance outstanding at the beginning of the period until the revenue exceeds that balance. Any subsequent revenue we recognize increases contract asset balance. Revenue recognized for the three months ended March 31, 2021 that was included in the contract liabilities balance at December 31, 2020 was $128.4 million. Revenue recognized for the three months ended March 31, 2020 that was included in the contract liabilities balance at December 31, 2019 was $143.4 million.
For the three months ended March 31, 2021 and 2020, we recognized $(5.3) million and $(11.8) million, respectively, related to the unfavorable changes in estimates of contract revenue.
Transaction Price Allocated to the Remaining Unsatisfied Performance Obligations
Remaining unsatisfied performance obligations (“RUPO” or “order backlog”) represent the transaction price for products and services for which we have a material right but work has not been performed. The transaction price of the order backlog includes the base transaction price, variable consideration and changes in transaction price. The order backlog table does not include contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. The transaction price of order backlog related to unfilled, confirmed customer orders is estimated at each reporting date. As of March 31, 2021, the aggregate amount of the transaction price allocated to order backlog was $7,221.4 million. We expect to recognize revenue on approximately 44.7% of the order backlog through 2021 and 55.3% thereafter.
The following table details the order backlog for each business segment as of March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
2021
|
|
2022
|
|
Thereafter
|
|
Subsea
|
$
|
2,954.0
|
|
|
$
|
2,534.2
|
|
|
$
|
1,368.9
|
|
|
Surface Technologies
|
274.5
|
|
|
87.9
|
|
|
1.9
|
|
|
Total order backlog
|
$
|
3,228.5
|
|
|
$
|
2,622.1
|
|
|
$
|
1,370.8
|
|
NOTE 5. BUSINESS SEGMENTS
Management’s determination of our reporting segments was made on the basis of our strategic priorities within each segment and the differences in the products and services we provide, which corresponds to the manner in which our Chairman and Chief Executive Officer, as our chief operating decision maker, reviews and evaluates operating performance to make decisions about resources to be allocated to the segment. Subsequent to the Spin-off, we now operate under two reporting segments: Subsea and Surface Technologies:
•Subsea - designs and manufactures products and systems, and provides services used by oil and gas companies involved in offshore deep water exploration and production of crude oil and natural gas, while developing renewable alternatives to serve new energy industries.
•Surface Technologies - designs and manufactures products and systems and provides services used by oil and gas companies involved in land and shallow water exploration and production of crude oil and natural gas; designs, manufactures, and supplies technologically advanced high-pressure valves and fittings for oilfield service companies; and also provides flowback and well testing services.
Segment operating profit (loss) is defined as total segment revenue less segment operating expenses. Income (loss) from equity method investments is included in computing segment operating profit. The following items have been excluded in computing segment operating profit (loss): corporate staff expense, foreign exchange gains (losses), income from investment in Technip Energies, net interest income (expense) associated with corporate debt facilities and income taxes.
Segment revenue and segment operating profit (loss) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
(In millions)
|
|
|
|
|
2021
|
|
2020
|
|
Segment revenue
|
|
|
|
|
|
|
|
|
Subsea
|
|
|
|
|
$
|
1,386.5
|
|
|
$
|
1,253.1
|
|
|
Surface Technologies
|
|
|
|
|
245.5
|
|
|
329.5
|
|
|
Total revenue
|
|
|
|
|
$
|
1,632.0
|
|
|
$
|
1,582.6
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit (loss)
|
|
|
|
|
|
|
|
|
Subsea
|
|
|
|
|
$
|
37.0
|
|
|
$
|
(2,750.7)
|
|
|
Surface Technologies
|
|
|
|
|
8.2
|
|
|
(424.0)
|
|
|
Total segment operating profit (loss)
|
|
|
|
|
$
|
45.2
|
|
|
$
|
(3,174.7)
|
|
|
|
|
|
|
|
|
|
|
|
Corporate items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expense(a)
|
|
|
|
|
(28.8)
|
|
|
(30.3)
|
|
|
Net interest expense
|
|
|
|
|
(34.5)
|
|
|
(23.0)
|
|
|
Loss on early extinguishment of debt
|
|
|
|
|
(23.5)
|
|
|
—
|
|
|
Income from investment in Technip Energies
|
|
|
|
|
470.1
|
|
|
—
|
|
|
Foreign exchange gains (losses)
|
|
|
|
|
28.1
|
|
|
(23.1)
|
|
|
Total corporate items
|
|
|
|
|
411.4
|
|
|
(76.4)
|
|
|
Income (loss) before income taxes(b)
|
|
|
|
|
$
|
456.6
|
|
|
$
|
(3,251.1)
|
|
(a)Corporate expense primarily includes corporate staff expenses, share-based compensation expenses, impairment, restructuring and other expense, and other employee benefits.
(b)Includes amounts attributable to non-controlling interests.
NOTE 6. EARNINGS (LOSS) PER SHARE
A reconciliation of the number of shares used for the basic and diluted earnings (loss) per share calculation was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
(In millions, except per share data)
|
|
|
|
|
2021
|
|
2020
|
|
Income (loss) from continuing operations attributable to TechnipFMC plc
|
|
|
|
|
$
|
430.3
|
|
|
$
|
(3,234.8)
|
|
|
Income (loss) from discontinued operations attributable to TechnipFMC plc
|
|
|
|
|
(62.1)
|
|
|
(21.3)
|
|
|
Net Income (loss) attributable to TechnipFMC plc
|
|
|
|
|
$
|
368.2
|
|
|
$
|
(3,256.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares outstanding
|
|
|
|
|
449.7
|
|
|
447.5
|
|
|
Dilutive effect of restricted stock units
|
|
|
|
|
1.4
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shares and dilutive securities
|
|
|
|
|
451.1
|
|
|
447.5
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per share attributable to TechnipFMC plc:
|
|
|
|
|
|
|
|
|
Earnings (loss) per share from continuing operations attributable to TechnipFMC plc
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
$
|
0.96
|
|
|
$
|
(7.23)
|
|
|
Diluted
|
|
|
|
|
$
|
0.95
|
|
|
$
|
(7.23)
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share from discontinued operations attributable to TechnipFMC plc
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
|
|
$
|
(0.14)
|
|
|
$
|
(0.05)
|
|
|
|
|
|
|
|
|
|
|
|
Total earnings (loss) per share attributable to TechnipFMC plc
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
$
|
0.82
|
|
|
$
|
(7.28)
|
|
|
Diluted
|
|
|
|
|
$
|
0.81
|
|
|
$
|
(7.28)
|
|
For the three months ended March 31, 2020, we incurred a loss from continuing operations; therefore, the impact of 2.7 million shares were anti-dilutive.
Weighted average shares of the following share-based compensation awards were excluded from the calculation of diluted weighted average number of shares where the assumed proceeds exceed the average market price from the calculation of diluted weighted average number of shares, because their effect would be anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
(millions of shares)
|
|
|
|
|
2021
|
|
2020
|
|
Share option awards
|
|
|
|
|
1.7
|
|
|
4.7
|
|
|
Restricted share units
|
|
|
|
|
4.9
|
|
|
1.1
|
|
|
Performance shares
|
|
|
|
|
—
|
|
|
2.5
|
|
|
Total
|
|
|
|
|
6.6
|
|
|
8.3
|
|
NOTE 7. RECEIVABLES
We manage our receivables portfolios using published default risk as a key credit quality indicator for our loans and receivables. Our loans receivable and security deposits were related to sales of long-lived assets or businesses, loans to related parties for capital expenditure purposes, or security deposits for lease arrangements.
We manage our held-to-maturity debt securities using published credit ratings as a key credit quality indicator as our held-to-maturity debt securities consist of government bonds.
The table below summarizes the amortized cost basis of financial assets by years of origination and credit quality. The key credit quality indicator is updated as of March 31, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Year of origination
|
|
Balance as of March 31, 2021
|
|
Balance as of December 31, 2020
|
|
Loans receivables, security deposits and other
|
|
|
|
|
|
|
Moody’s rating Ba2
|
2019
|
|
$
|
98.5
|
|
|
$
|
107.6
|
|
|
|
|
|
|
|
|
|
Debt securities at amortized cost
|
|
|
|
|
|
|
Moody’s rating B3
|
2019
|
|
—
|
|
|
23.7
|
|
|
Total financial assets
|
|
|
$
|
98.5
|
|
|
$
|
131.3
|
|
Credit Losses
For contract assets, trade receivables, loans receivable, and security deposits and other, we have elected to calculate an expected credit loss based on loss rates from historical data. We develop loss-rate statistics on the basis of the amount written off over the life of the financial assets and contract assets and adjust these historical credit loss trends for forward-looking factors specific to the debtors and the economic environment to determine lifetime expected losses.
For held-to-maturity debt securities at amortized cost, we evaluate whether the debt securities are considered to have low credit risk at the reporting date using available, reasonable, and supportable information.
The table below shows the roll-forward of allowance for credit losses as of March 31, 2021 and 2020, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2021
|
|
(In millions)
|
Trade receivables
|
|
Contract assets
|
|
Loans receivable
|
|
Security deposit and other
|
|
Held-to-maturity debt securities
|
|
Beginning balance in allowance for credit losses
|
$
|
40.2
|
|
|
$
|
2.4
|
|
|
$
|
7.5
|
|
|
$
|
0.4
|
|
|
$
|
0.5
|
|
|
Current period provision (release) for expected credit losses
|
3.8
|
|
|
(0.6)
|
|
|
(0.5)
|
|
|
0.2
|
|
|
(0.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries
|
(5.5)
|
|
|
(0.7)
|
|
|
(1.1)
|
|
|
—
|
|
|
—
|
|
|
Ending balance in the allowance for credit losses
|
$
|
38.5
|
|
|
$
|
1.1
|
|
|
$
|
5.9
|
|
|
$
|
0.6
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of March 31, 2020
|
|
(In millions)
|
Trade receivables
|
|
Contract assets
|
|
Loans receivable
|
|
Security deposit and other
|
|
Held-to-maturity debt securities
|
|
Beginning balance in allowance for credit losses
|
$
|
59.4
|
|
|
$
|
4.5
|
|
|
$
|
9.5
|
|
|
$
|
0.7
|
|
|
$
|
1.1
|
|
|
Current period provision for expected credit losses
|
1.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recoveries
|
(2.6)
|
|
|
—
|
|
|
(0.5)
|
|
|
—
|
|
|
—
|
|
|
Ending balance in the allowance for credit losses
|
$
|
58.4
|
|
|
$
|
4.5
|
|
|
$
|
9.0
|
|
|
$
|
0.7
|
|
|
$
|
1.1
|
|
Other than certain trade receivables due in one year or less, we do not have any financial assets that are past due or are on non-accrual status.
NOTE 8. INVENTORIES
Inventories consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31,
2021
|
|
December 31,
2020
|
|
Raw materials
|
$
|
222.6
|
|
|
$
|
270.3
|
|
|
Work in process
|
227.5
|
|
|
242.7
|
|
|
Finished goods
|
714.7
|
|
|
739.8
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
$
|
1,164.8
|
|
|
$
|
1,252.8
|
|
NOTE 9. OTHER CURRENT ASSETS & OTHER CURRENT LIABILITIES
Other current assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31,
2021
|
|
December 31,
2020
|
|
Value - added tax receivables
|
$
|
260.1
|
|
|
$
|
236.4
|
|
|
Prepaid expenses
|
95.4
|
|
|
78.1
|
|
|
Other tax receivables
|
80.0
|
|
|
73.8
|
|
|
Sundry receivables
|
74.1
|
|
|
138.4
|
|
|
Assets held for sale
|
47.4
|
|
|
47.3
|
|
|
Current financial assets at amortized cost
|
30.9
|
|
|
40.6
|
|
|
Held-to-maturity investments
|
—
|
|
|
24.2
|
|
|
Other
|
37.9
|
|
|
24.1
|
|
|
Total other current assets
|
$
|
625.8
|
|
|
$
|
662.9
|
|
Other current liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31,
2021
|
|
December 31,
2020
|
|
Warranty accruals and project contingencies
|
$
|
193.2
|
|
|
$
|
168.8
|
|
|
Legal provisions
|
129.6
|
|
|
127.6
|
|
|
Value - added tax and other taxes payable
|
126.2
|
|
|
91.4
|
|
|
BPI Share Purchase Agreement payable
|
100.0
|
|
|
—
|
|
|
Social security liability
|
65.9
|
|
|
67.9
|
|
|
Taxes payable to Technip Energies due to separation
|
59.0
|
|
|
—
|
|
|
Provisions
|
36.1
|
|
|
53.0
|
|
|
Compensation accrual
|
18.6
|
|
|
54.3
|
|
|
Current portion of accrued pension and other post-retirement benefits
|
7.1
|
|
|
6.9
|
|
|
|
|
|
|
|
Other accrued liabilities
|
249.9
|
|
|
230.2
|
|
|
Total other current liabilities
|
$
|
985.6
|
|
|
$
|
800.1
|
|
NOTE 10. WARRANTY OBLIGATIONS
Warranty obligations are included within “Other current liabilities” in our consolidated balance sheets as of March 31, 2021 and December 31, 2020. A reconciliation of warranty obligations for the three months ended March 31, 2021 and 2020 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
(In millions)
|
|
|
|
|
2021
|
|
2020
|
|
Balance at beginning of period
|
|
|
|
|
$
|
109.5
|
|
|
$
|
121.7
|
|
|
Warranty expenses
|
|
|
|
|
12.5
|
|
|
6.1
|
|
|
Adjustment to existing accruals
|
|
|
|
|
(12.3)
|
|
|
23.8
|
|
|
Claims paid
|
|
|
|
|
(3.0)
|
|
|
(0.9)
|
|
|
Balance at end of period
|
|
|
|
|
$
|
106.7
|
|
|
$
|
150.7
|
|
NOTE 11. EQUITY METHOD INVESTMENTS
Our income from equity affiliates during the three months ended March 31, 2021 and 2020 was $7.7 million and $21.1 million, respectively, and included within our Subsea segment.
Investment in Technip Energies
As discussed in Note 2, immediately following the completion of the Spin-off, we owned 49.9% of the outstanding shares of Technip Energies. On January 7, 2021, Bpifrance Participations SA (“BPI”) entered into a share purchase agreement with us (the “Share Purchase Agreement”) pursuant to which BPI agreed to purchase a portion of our retained stake in Technip Energies N.V. (the “BPI Investment”) for $200.0 million (the “Purchase Price”), subject to certain adjustments. On March 31, 2021, BPI ultimately purchased 7.5 million shares in Technip Energies from us for $100.0 million. Accordingly, on April 8, 2021, we refunded $100.0 million to BPI as a result of their revised level of investment. As of March 31, 2021, we owned 82.3 million shares, representing 45.7% of the outstanding shares of Technip Energies.
On April 27, 2021 we further reduced our ownership in Technip Energies and agreed to sell Technip Energies shares, representing approximately a total of 15% of Technip Energies’ share capital, through a private placement and the concurrent sale to Technip Energies. See Note 21 for details. We do not intend to remain a long-term shareholder of Technip Energies and will exit our ownership stake in a timely and orderly manner within a year.
At the Spin-off date, on initial recognition of the investment, we elected to account for our investment in Technip Energies at fair value with all subsequent changes in fair value for the investment reported in our consolidated statement of income.
For the three months ended March 31, 2021, we recognized $470.1 million of income related to our investment in Technip Energies. The amount recognized was comprised of a purchase price discount on sale of shares to BPI and a fair value revaluation gain of our investment. The carrying amount of the investment as of March 31, 2021 was $1,249.0 million.
NOTE 12. RELATED PARTY TRANSACTIONS
Receivables, payables, revenues, and expenses, which are included in our condensed consolidated financial statements for all transactions with related parties, defined as entities related to our directors and main shareholders as well as the partners of our consolidated joint ventures, were as follows.
Accounts receivable consisted of receivables due from the following related parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31,
2021
|
|
December 31, 2020
|
|
Technip Energies
|
$
|
130.5
|
|
|
$
|
—
|
|
|
Equinor ASA
|
32.1
|
|
|
24.1
|
|
|
Dofcon Navegacao
|
2.9
|
|
|
4.2
|
|
|
Techdof Brasil AS
|
6.5
|
|
|
8.0
|
|
|
|
|
|
|
|
Others
|
2.1
|
|
|
1.7
|
|
|
Total accounts receivable
|
$
|
174.1
|
|
|
$
|
38.0
|
|
Dofcon Navegacao is an equity method affiliate. Techdof Brasil AS is a wholly owned subsidiary of Dofcon Brasil AS, our equity method affiliate. In October 2020, a prior member of our Board of Directors was an executive of Equinor ASA. One member of our Board of Directors serves on the Board of Directors for Storengy.
Accounts payable consisted of payables due to the following related parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31,
2021
|
|
December 31,
2020
|
|
Technip Energies
|
$
|
216.7
|
|
|
$
|
—
|
|
|
Dofcon Navegacao
|
1.9
|
|
|
1.5
|
|
|
Others
|
4.0
|
|
|
3.1
|
|
|
Total accounts payable
|
$
|
222.6
|
|
|
$
|
4.6
|
|
Additionally, we have a note receivable from Dofcon Brasil AS for $25.3 million and $37.6 million as of March 31, 2021 and December 31, 2020, respectively. Dofcon Brasil AS is a variable interest entity and accounted for as an equity method investment.
Revenue consisted of amounts from the following related parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
(In millions)
|
|
|
|
|
2021
|
|
2020
|
|
Equinor ASA
|
|
|
|
|
$
|
95.5
|
|
|
$
|
—
|
|
|
Technip Energies
|
|
|
|
|
1.5
|
|
|
—
|
|
|
Techdof Brasil AS
|
|
|
|
|
3.5
|
|
|
1.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Others
|
|
|
|
|
3.1
|
|
|
3.0
|
|
|
Total revenue
|
|
|
|
|
$
|
103.6
|
|
|
$
|
4.3
|
|
Expenses consisted of amounts to the following related parties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
(In millions)
|
|
|
|
|
2021
|
|
2020
|
|
Technip Energies
|
|
|
|
|
$
|
0.6
|
|
|
$
|
—
|
|
|
Dofcon Navegacao
|
|
|
|
|
6.6
|
|
|
8.0
|
|
|
Arkema S.A.
|
|
|
|
|
0.7
|
|
|
0.4
|
|
|
Magma Global Limited
|
|
|
|
|
1.5
|
|
|
0.7
|
|
|
IFP Energies Nouvelles
|
|
|
|
|
0.9
|
|
|
1.1
|
|
|
Serimax Holdings SAS
|
|
|
|
|
—
|
|
|
0.2
|
|
|
Others
|
|
|
|
|
6.6
|
|
|
5.9
|
|
|
Total expenses
|
|
|
|
|
$
|
16.9
|
|
|
$
|
16.3
|
|
Serimax Holdings SAS and Magma Global Limited are equity method investments. A former member of our Board of Directors serves on the Board of Directors for Arkema S.A. A former member of our Board of Directors served as an executive officer of IFP Energies nouvelles until June 2020.
NOTE 13. DEBT
Overview
Long-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31,
2021
|
|
December 31,
2020
|
|
Senior secured revolving credit facility
|
$
|
200.0
|
|
|
$
|
—
|
|
|
|
|
|
|
|
Commercial paper
|
21.2
|
|
|
1,043.7
|
|
|
Synthetic bonds due 2021
|
—
|
|
|
551.2
|
|
|
3.45% Senior Notes due 2022
|
—
|
|
|
500.0
|
|
|
3.40% 2012 Private placement notes due 2022
|
176.1
|
|
|
184.0
|
|
|
3.15% 2013 Private placement notes due 2023
|
299.3
|
|
|
312.9
|
|
|
5.75% 2020 Private placement notes due 2025
|
234.8
|
|
|
245.4
|
|
|
6.50% Senior notes due 2026
|
1,000.0
|
|
|
—
|
|
|
4.00% 2012 Private placement notes due 2027
|
88.0
|
|
|
92.0
|
|
|
4.00% 2012 Private placement notes due 2032
|
117.4
|
|
|
122.7
|
|
|
3.75% 2013 Private placement notes due 2033
|
117.4
|
|
|
122.7
|
|
|
Bank borrowings and other
|
313.7
|
|
|
298.4
|
|
|
|
|
|
|
|
Unamortized debt issuance costs and discounts
|
(36.8)
|
|
|
(12.8)
|
|
|
Total debt
|
2,531.1
|
|
|
3,460.2
|
|
|
Less: current borrowings (a)
|
96.8
|
|
|
624.7
|
|
|
Long-term debt
|
$
|
2,434.3
|
|
|
$
|
2,835.5
|
|
(a) As of March 31, 2021 and December 31, 2020, current borrowings consisted primarily of bank borrowings and notes with current maturities of 12 months.
Debt Financing Transactions in Connection with the Spin-off
In connection with the Spin-off, we executed a series of refinancing transactions, in order to provide a capital structure with sufficient cash resources to support future operating and investment plans.
Debt Issuance
•On February 16, 2021, we entered into a credit agreement, which provides for a $1.0 billion three-year senior secured multicurrency revolving credit facility (“Revolving Credit Facility”) including a $450.0 million letter of credit subfacility; and
•On January 29, 2021, we issued $1.0 billion of 6.50% senior notes due 2026 (the “2021 Notes”).
Repayment of Debt
The proceeds from the debt issuance described above along with the available cash on hand were used to fund:
•The repayment of all $542.4 million of the outstanding Synthetic Convertible Bonds that matured in January 2021;
•The repayment of all $500.0 million aggregate principal amount of outstanding 3.45% Senior Notes due 2022. In connection with the repayment, we recorded a loss on extinguishment of debt of $23.5 million related to the difference between the amount paid and the net carrying value of the debt; and
•The termination of the $2.5 billion senior unsecured revolving credit facility entered into on January 17, 2017; and the termination of the €500.0 million Euro Facility entered into on May 19, 2020; and the termination of the CCFF Program entered into on May 19, 2020. In connection with the termination of these credit facilities, we repaid $830.9 million of the outstanding commercial paper borrowings.
Credit Facilities and Debt
Revolving Credit Facility - On February 16, 2021, we entered into a credit agreement, which provides for a $1.0 billion three-year senior secured multicurrency Revolving Credit Facility including a $450.0 million letter of credit subfacility. We incurred $27.9 million of debt issuance costs in connection with the Revolving Credit Facility. These debt issuance costs are deferred and are included in Other Assets in our condensed consolidated balance sheet as of March 31, 2021. The deferred debt issuance costs are amortized to interest expense over the term of the Revolving Credit Facility.
Availability of borrowings under the Revolving Credit Facility is reduced by the outstanding letters of credit issued against the facility. As of March 31, 2021, there were no letters of credit outstanding and availability of borrowings under the Revolving Credit Facility was $800.0 million.
Borrowings under the Revolving Credit Facility bear interest at the following rates, plus an applicable margin, depending on currency:
•U.S. dollar-denominated loans bear interest, at the Company’s option, at a base rate or an adjusted rate linked to the London interbank offered rate (“Adjusted LIBOR”);
•Sterling denominated loans bear interest at Adjusted LIBOR; and
•Euro-denominated loans bear interest on an adjusted rate linked to the Euro interbank offered rate.
The applicable margin for borrowings under the Revolving Credit Facility ranges from 2.50% to 3.50% for eurocurrency loans and 1.50% to 2.50% for base rate loans, depending on a total leverage ratio. The Revolving Credit Facility is subject to customary representations and warranties, covenants, events of default, mandatory repayment provisions and financial covenants. As of March 31, 2021, we were in compliance with all restrictive covenants under the Revolving Credit Facility.
2021 Notes - On January 29, 2021, we issued $1.0 billion of 6.50% senior notes due 2026. The interest on the 2021 Notes is paid semi-annually on February 1 and August 1 of each year, beginning on August 1, 2021. The 2021 Notes are senior unsecured obligations and are guaranteed on a senior unsecured basis by substantially all of our wholly-owned U.S. subsidiaries and non-U.S. subsidiaries in Brazil, the Netherlands, Norway, Singapore and the United Kingdom. We incurred $25.7 million of debt issuance costs in connection with issuance of the 2021 Notes. These debt issuance costs are deferred and are included in Long-term debt in our condensed consolidated balance sheet as of March 31, 2021. The deferred debt issuance costs are amortized to interest expense over the term of the 2021 Notes, which approximates the effective interest method.
Commercial paper - As of March 31, 2021 and December 31, 2020, we had $21.2 million and $1,043.7 million of commercial paper outstanding, respectively. Commercial paper borrowings were issued at market interest rates. As of March 31, 2021, our commercial paper borrowings had a weighted average interest rate of 0.48% on the U.S.
dollar denominated borrowings. In accordance with the terms of the new Revolving Credit Facility, we do not have an ability to issue any new commercial paper notes going forward.
Bank borrowings - Include term loans issued in connection with financing for certain of our vessels and amounts outstanding under our foreign committed credit lines.
NOTE 14. STOCKHOLDERS’ EQUITY
Accumulated other comprehensive income (loss) consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Foreign Currency
Translation
|
|
|
|
Hedging
|
|
Defined Pension
and Other
Post-Retirement
Benefits
|
|
Accumulated Other
Comprehensive
Loss Attributable to
TechnipFMC plc
|
|
Accumulated Other
Comprehensive
Loss Attributable
to Non-Controlling Interest
|
|
December 31, 2020
|
$
|
(1,401.2)
|
|
|
|
|
$
|
34.0
|
|
|
$
|
(255.3)
|
|
|
$
|
(1,622.5)
|
|
|
$
|
(4.1)
|
|
|
Other comprehensive income (loss) before reclassifications, net of tax
|
(28.2)
|
|
|
|
|
(14.5)
|
|
|
3.5
|
|
|
(39.2)
|
|
|
0.1
|
|
|
Reclassification adjustment for net losses included in net income (loss), net of tax
|
—
|
|
|
|
|
(2.7)
|
|
|
4.9
|
|
|
2.2
|
|
|
—
|
|
|
Other comprehensive income (loss), net of tax
|
(28.2)
|
|
|
|
|
(17.2)
|
|
|
8.4
|
|
|
(37.0)
|
|
|
0.1
|
|
|
Spin-off of Technip Energies
|
241.2
|
|
|
|
|
(19.7)
|
|
|
37.2
|
|
|
258.7
|
|
|
—
|
|
|
March 31, 2021
|
$
|
(1,188.2)
|
|
|
|
|
$
|
(2.9)
|
|
|
$
|
(209.7)
|
|
|
$
|
(1,400.8)
|
|
|
$
|
(4.0)
|
|
Reclassifications out of accumulated other comprehensive income (loss) consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
March 31,
|
|
|
|
(In millions)
|
|
|
|
|
2021
|
|
2020
|
|
|
|
Details about Accumulated Other Comprehensive Income (loss) Components
|
|
|
|
|
Amount Reclassified out of Accumulated Other
Comprehensive Loss
|
|
Affected Line Item in the Condensed Consolidated Statements of Income
|
|
Gains (losses) on hedging instruments
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
|
|
$
|
(10.4)
|
|
|
$
|
(11.1)
|
|
|
Revenue
|
|
|
|
|
|
|
8.3
|
|
|
9.8
|
|
|
Cost of sales
|
|
|
|
|
|
|
0.1
|
|
|
—
|
|
|
Selling, general and administrative expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.0
|
|
|
1.0
|
|
|
Other income (expense), net
|
|
|
|
|
|
|
2.0
|
|
|
(0.3)
|
|
|
Income (loss) before income taxes
|
|
|
|
|
|
|
(0.7)
|
|
|
(0.2)
|
|
|
Provision for income taxes
|
|
|
|
|
|
|
$
|
2.7
|
|
|
$
|
(0.1)
|
|
|
Net income (loss)
|
|
Pension and other post-retirement benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service credit (cost)
|
|
|
|
|
(0.1)
|
|
|
(0.3)
|
|
|
(a)
|
|
Amortization of net actuarial loss
|
|
|
|
|
(6.9)
|
|
|
(2.8)
|
|
|
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7.0)
|
|
|
(3.1)
|
|
|
Income (loss) before income taxes
|
|
|
|
|
|
|
(2.1)
|
|
|
(0.6)
|
|
|
Provision for income taxes
|
|
|
|
|
|
|
$
|
(4.9)
|
|
|
$
|
(2.5)
|
|
|
Net income (loss)
|
(a)These accumulated other comprehensive income components are included in the computation of net periodic pension cost.
NOTE 15. SHARE-BASED COMPENSATION
Under the Amended and Restated TechnipFMC plc Incentive Award Plan (the “Plan”), we may grant certain incentives and awards to our officers, employees, non-employee directors, and consultants of the Company and its subsidiaries. Awards may include share options, share appreciation rights, performance stock units, restricted stock units, restricted shares or other awards authorized under the Plan. Under the Plan, 24.1 million ordinary shares were authorized for awards in 2017. On the record date of the Spin-off, 11.9 million shares remained available under the Plan, which were adjusted to reflect the Spin-off using an adjustment ratio, calculated as the ratio of the closing price of shares of TechnipFMC common stock on the NYSE on the date immediately prior to the Spin-off to the closing price of shares of TechnipFMC on the NYSE on the date immediately after the Spin-off. After this adjustment, 15.2 million ordinary shares remained authorized for awards under the Plan as of February 17, 2021.
We recognize compensation expense and the corresponding tax benefits for awards under the Plan. Share-based compensation expense for non-vested share options and time-based and performance-based restricted stock units was $3.4 million and $21.6 million for the three months ended March 31, 2021 and 2020, respectively.
NOTE 16. IMPAIRMENT, RESTRUCTURING AND OTHER EXPENSES
Impairment, restructuring and other expenses were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
(In millions)
|
|
|
|
|
2021
|
|
2020
|
|
Subsea
|
|
|
|
|
$
|
19.7
|
|
|
2,773.6
|
|
|
Surface Technologies
|
|
|
|
|
2.8
|
|
|
424.4
|
|
|
Corporate and other
|
|
|
|
|
3.0
|
|
|
1.1
|
|
|
Total impairment, restructuring and other expenses
|
|
|
|
|
$
|
25.5
|
|
|
$
|
3,199.1
|
|
Goodwill and Long-Lived Assets Impairments
Goodwill and long-lived assets impairments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
(In millions)
|
|
|
|
|
2021
|
|
2020
|
|
Subsea
|
|
|
|
|
$
|
15.7
|
|
|
$
|
2,776.5
|
|
|
Surface Technologies
|
|
|
|
|
0.1
|
|
|
411.5
|
|
|
Corporate and other
|
|
|
|
|
3.0
|
|
|
—
|
|
|
Total impairments
|
|
|
|
|
$
|
18.8
|
|
|
$
|
3,188.0
|
|
During the three months ended March 31, 2021, subsequent to the spin-off, certain real estate realization decisions were made and as a result, we recorded $18.8 million of impairment charges relating to our operating lease right-of-use assets.
During the three months ended March 31, 2020, triggering events were identified that led to impairments of certain long-lived assets, including goodwill. During the three months ended March 31, 2020, impairment charges of $3,188.0 million were recorded. These charges included goodwill impairment charges of $2,747.5 million and $335.9 million in our Subsea and Surface Technologies segments, respectively.
For other long-lived assets, a conclusion was made that the market uncertainty was a triggering event for certain asset groups that serve short-cycle businesses in our Subsea and Surface Technologies segments. Assessing these asset groups for recoverability required the use of unobservable inputs that require significant judgment. Such judgments include expected future asset utilization while taking into account reduced future capital spending by certain customers in response to market conditions. As a result of this assessment, impairment charges of $29.0 million for Subsea, consisting mostly of installation and service equipment, and $75.6 million for Surface
Technologies, consisting of North America-based fracturing and wellhead assets were recorded during the three months ended March 31, 2020.
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that carrying amounts of such assets may not be recoverable. Assessing the recoverability of assets to be held and used requires the use of unobservable inputs that involves significant judgment. Such judgments include expected future asset utilization while taking into account reduced future capital spending by certain customers in response to market conditions.
Restructuring and Other Expenses
Restructuring and other charges primarily consisted of severance and other employee related costs and COVID-19 related expenses across all segments. Restructuring and other expenses were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
2021
|
|
|
|
2020
|
|
(In millions)
|
Restructuring and other charges
|
|
|
|
Restructuring and other charges
|
|
COVID-19 expenses
|
|
Subsea
|
$
|
4.0
|
|
|
|
|
$
|
(6.9)
|
|
|
$
|
4.0
|
|
|
Surface Technologies
|
2.7
|
|
|
|
|
11.8
|
|
|
1.1
|
|
|
Corporate and other
|
—
|
|
|
|
|
1.1
|
|
|
—
|
|
|
Total
|
$
|
6.7
|
|
|
|
|
$
|
6.0
|
|
|
$
|
5.1
|
|
During the three months ended March 31, 2020, we incurred $5.1 million of COVID-19 related expenses. These expenses represent unplanned, one-off, incremental and non-recoverable costs incurred solely as a result of the COVID-19 pandemic situation, which would not have been incurred otherwise.
Prolonged uncertainty in energy markets could lead to further reductions in capital spending from our customer base. In turn, this may lead to changes in our strategy. We will continue to take actions to mitigate the adverse effects of the changing market environment and expect to continue to adjust our cost structure to market conditions. If market conditions deteriorate, we may record additional restructuring charges and additional impairments of our long-lived assets, operating lease right-of-use assets and equity method investments.
NOTE 17. COMMITMENTS AND CONTINGENT LIABILITIES
Contingent liabilities associated with guarantees - In the ordinary course of business, we enter into standby letters of credit, performance bonds, surety bonds, and other guarantees with financial institutions for the benefit of our customers, vendors, and other parties. The majority of these financial instruments expire within five years. Management does not expect any of these financial instruments to result in losses that, if incurred, would have a material adverse effect on our condensed consolidated financial position, results of operations, or cash flows.
Guarantees consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
March 31,
2021
|
|
December 31,
2020
|
|
Financial guarantees (a)
|
$
|
98.4
|
|
|
$
|
104.9
|
|
|
Performance guarantees (b)
|
1,146.8
|
|
|
1,353.9
|
|
|
Maximum potential undiscounted payments
|
$
|
1,245.2
|
|
|
$
|
1,458.8
|
|
(a)Financial guarantees represent contracts that contingently require a guarantor to make payments to a guaranteed party based on changes in an underlying agreement that is related to an asset, a liability or an equity security of the guaranteed party. These tend to be drawn down only if there is a failure to fulfill our financial obligations.
(b)Performance guarantees represent contracts that contingently require a guarantor to make payments to a guaranteed party based on another entity's failure to perform under a nonfinancial obligating agreement. Events that trigger payment are performance-related, such as failure to ship a product or provide a service.
We believe the ultimate resolution of our known contingencies will not materially adversely affect our consolidated financial position, results of operations, or cash flows.
Contingent liabilities associated with legal and tax matters - We are involved in various pending or potential legal and tax actions or disputes in the ordinary course of our business. These actions and disputes can involve our agents, suppliers, clients, and venture partners, and can include claims related to payment of fees, service quality, and ownership arrangements, including certain put or call options. We are unable to predict the ultimate outcome of these actions because of their inherent uncertainty. However, we believe that the most probable, ultimate resolution of these matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.
On March 28, 2016, FMC Technologies received an inquiry from the U.S. Department of Justice (“DOJ”) related to the DOJ's investigation of whether certain services Unaoil S.A.M. provided to its clients, including FMC Technologies, violated the U.S. Foreign Corrupt Practices Act (“FCPA”). On March 29, 2016, Technip S.A. also received an inquiry from the DOJ related to Unaoil. We cooperated with the DOJ's investigations and, with regard to FMC Technologies, a related investigation by the SEC.
In late 2016, Technip S.A. was contacted by the DOJ regarding its investigation of offshore platform projects awarded between 2003 and 2007, performed in Brazil by a joint venture company in which Technip S.A. was a minority participant, and we have also raised with the DOJ certain other projects performed by Technip S.A. subsidiaries in Brazil between 2002 and 2013. The DOJ has also inquired about projects in Ghana and Equatorial Guinea that were awarded to Technip S.A. subsidiaries in 2008 and 2009, respectively. We cooperated with the DOJ in its investigation into potential violations of the FCPA in connection with these projects. We contacted and cooperated with the Brazilian authorities (Federal Prosecution Service (“MPF”), the Comptroller General of Brazil (“CGU”) and the Attorney General of Brazil (“AGU”)) with their investigation concerning the projects in Brazil and have also contacted and are cooperating with French authorities (the Parquet National Financier (“PNF”)) with their investigation about these existing matters.
On June 25, 2019, we announced a global resolution to pay a total of $301.3 million to the DOJ, the SEC, the MPF, and the CGU/AGU to resolve these anti-corruption investigations. We will not be required to have a monitor and will, instead, provide reports on our anti-corruption program to the Brazilian and U.S. authorities for two and three years, respectively.
As part of this resolution, we entered into a three-year Deferred Prosecution Agreement (“DPA”) with the DOJ related to charges of conspiracy to violate the FCPA related to conduct in Brazil and with Unaoil. In addition, Technip USA, Inc., a U.S. subsidiary, pled guilty to one count of conspiracy to violate the FCPA related to conduct in Brazil. We will also provide the DOJ reports on our anti-corruption program during the term of the DPA.
In Brazil, our subsidiaries Technip Brasil - Engenharia, Instalações E Apoio Marítimo Ltda. and Flexibrás Tubos Flexíveis Ltda. entered into leniency agreements with both the MPF and the CGU/AGU. We have committed, as part of those agreements, to make certain enhancements to their compliance programs in Brazil during a two-year self-reporting period, which aligns with our commitment to cooperation and transparency with the compliance community in Brazil and globally.
In September 2019, the SEC approved our previously disclosed agreement in principle with the SEC Staff and issued an Administrative Order, pursuant to which we paid the SEC $5.1 million, which was included in the global resolution of $301.3 million.
To date, the investigation by PNF related to historical projects in Equatorial Guinea and Ghana has not reached resolution. We remain committed to finding a resolution with the PNF and will maintain a $70.0 million provision related to this investigation. As we continue to progress our discussions with PNF towards resolution, the amount of a settlement could exceed this provision.
There is no certainty that a settlement with PNF will be reached or that the settlement will not exceed current accruals. The PNF has a broad range of potential sanctions under anti-corruption laws and regulations that it may seek to impose in appropriate circumstances including, but not limited to, fines, penalties, and modifications to business practices and compliance programs. Any of these measures, if applicable to us, as well as potential customer reaction to such measures, could have a material adverse impact on our business, results of operations, and financial condition. If we cannot reach a resolution with the PNF, we could be subject to criminal proceedings in France, the outcome of which cannot be predicted.
Contingent liabilities associated with liquidated damages - Some of our contracts contain provisions that require us to pay liquidated damages if we are responsible for the failure to meet specified contractual milestone dates and the applicable customer asserts a conforming claim under these provisions. These contracts define the conditions under which our customers may make claims against us for liquidated damages. Based upon the evaluation of our performance and other commercial and legal analysis, management believes we have appropriately recognized probable liquidated damages at March 31, 2021 and December 31, 2020, and that the ultimate resolution of such matters will not materially affect our consolidated financial position, results of operations, or cash flows.
NOTE 18. INCOME TAXES
Our provision for income taxes for the three months ended March 31, 2021 and 2020 reflected effective tax rates of 5.4% and 0.7%, respectively. The year-over-year increase in the effective tax rate was primarily due to the increased impact of losses including certain impairments in jurisdictions with a full valuation allowance, and a change in the forecasted earnings mix.
Our effective tax rate can fluctuate depending on our country mix of earnings, since our foreign earnings are generally subject to higher tax rates than in the United Kingdom.
NOTE 19. DERIVATIVE FINANCIAL INSTRUMENTS
For purposes of mitigating the effect of changes in exchange rates, we hold derivative financial instruments to hedge the risks of certain identifiable and anticipated transactions and recorded assets and liabilities in our condensed consolidated balance sheets. The types of risks hedged are those relating to the variability of future earnings and cash flows caused by movements in foreign currency exchange rates. Our policy is to hold derivatives only for the purpose of hedging risks associated with anticipated foreign currency purchases and sales created in the normal course of business, and not for trading purposes where the objective is solely to generate profit.
Generally, we enter into hedging relationships such that changes in the fair values or cash flows of the transactions being hedged are expected to be offset by corresponding changes in the fair value of the derivatives. For derivative instruments that qualify as a cash flow hedge, the effective portion of the gain or loss of the derivative, which does not include the time value component of a forward currency rate, is reported as a component of other comprehensive income (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. For derivative instruments not designated as hedging instruments, any change in the fair value of those instruments is reflected in earnings in the period such change occurs.
We hold the following types of derivative instruments:
Foreign exchange rate forward contracts - The purpose of these instruments is to hedge the risk of changes in future cash flows of anticipated purchase or sale commitments denominated in foreign currencies and recorded assets and liabilities in our condensed consolidated balance sheets. As of March 31, 2021, we held the following material net positions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Notional Amount
Bought (Sold)
|
|
(In millions)
|
|
|
USD Equivalent
|
|
Euro
|
464.4
|
|
|
544.8
|
|
|
British pound
|
287.2
|
|
|
395.5
|
|
|
Brazilian real
|
1,320.1
|
|
|
231.8
|
|
|
Norwegian krone
|
1,155.3
|
|
|
135.7
|
|
|
|
|
|
|
|
Singapore dollar
|
103.5
|
|
|
77.0
|
|
|
Canadian dollar
|
31.2
|
|
|
24.7
|
|
|
Indian rupee
|
752.9
|
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
|
Kuwaiti dinar
|
(3.0)
|
|
|
(10.0)
|
|
|
Indonesian rupiah
|
(191,631.6)
|
|
|
(13.2)
|
|
|
Australian dollar
|
(157.1)
|
|
|
(119.6)
|
|
|
Malaysian ringgit
|
(732.2)
|
|
|
(176.6)
|
|
|
U.S. dollar
|
(105.2)
|
|
|
(105.2)
|
|
Foreign exchange rate instruments embedded in purchase and sale contracts - The purpose of these instruments is to match offsetting currency payments and receipts for particular projects or comply with government restrictions on the currency used to purchase goods in certain countries. As of March 31, 2021, our portfolio of these instruments included the following material net positions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Notional Amount
Bought (Sold)
|
|
(In millions)
|
|
|
USD Equivalent
|
|
Brazilian real
|
64.8
|
|
|
11.4
|
|
|
Norwegian krone
|
(138.8)
|
|
|
(16.3)
|
|
|
Euro
|
(14.4)
|
|
|
(16.9)
|
|
|
U.S. dollar
|
20.7
|
|
|
20.7
|
|
Fair value amounts for all outstanding derivative instruments have been determined using available market information and commonly accepted valuation methodologies. See Note 20 for further details. Accordingly, the estimates presented may not be indicative of the amounts that we would realize in a current market exchange and may not be indicative of the gains or losses we may ultimately incur when these contracts are settled.
The following table presents the location and fair value amounts of derivative instruments reported in the condensed consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
|
|
(In millions)
|
Assets
|
|
Liabilities
|
|
Assets
|
|
Liabilities
|
|
|
|
|
|
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Current - Derivative financial instruments
|
$
|
199.7
|
|
|
$
|
164.8
|
|
|
$
|
189.5
|
|
|
$
|
141.9
|
|
|
|
|
|
|
Long-term - Derivative financial instruments
|
35.3
|
|
|
33.8
|
|
|
28.9
|
|
|
18.8
|
|
|
|
|
|
|
Total derivatives designated as hedging instruments
|
235.0
|
|
|
198.6
|
|
|
218.4
|
|
|
160.7
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Current - Derivative financial instruments
|
3.8
|
|
|
7.7
|
|
|
79.2
|
|
|
15.6
|
|
|
|
|
|
|
Long-term - Derivative financial instruments
|
—
|
|
|
0.4
|
|
|
0.3
|
|
|
—
|
|
|
|
|
|
|
Total derivatives not designated as hedging instruments
|
3.8
|
|
|
8.1
|
|
|
79.5
|
|
|
15.6
|
|
|
|
|
|
|
Total derivatives
|
$
|
238.8
|
|
|
$
|
206.7
|
|
|
$
|
297.9
|
|
|
$
|
176.3
|
|
|
|
|
|
Cash flow hedges of forecasted transactions qualifying for hedge accounting, net of tax, resulted in accumulated other comprehensive losses of $4.4 million and $12.9 million as of March 31, 2021 and December 31, 2020, respectively. We expect to transfer an approximate $36.0 million loss from accumulated OCI to earnings during the next 12 months when the anticipated transactions actually occur. All anticipated transactions currently being hedged are expected to occur by the second half of 2023.
The following table presents the gains (losses) recognized in other comprehensive income related to derivative instruments designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized in OCI
|
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
(In millions)
|
|
|
|
|
2021
|
|
2020
|
|
Foreign exchange contracts
|
|
|
|
|
$
|
(20.2)
|
|
|
$
|
(91.7)
|
|
The following represents the effect of cash flow hedge accounting in the condensed consolidated statements of income for the three months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
Three Months Ended March 31, 2021
|
|
Three Months Ended March 31, 2020
|
|
Total amount of income (expense) presented in the consolidated statements of income associated with hedges and derivatives
|
Revenue
|
|
Cost of sales
|
|
Selling,
general
and
administrative
expense
|
|
Other income (expense), net
|
|
Revenue
|
|
Cost of sales
|
|
Selling,
general
and
administrative
expense
|
|
Other income (expense), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow hedge gain (loss) recognized in income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Exchange Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified from accumulated OCI to income
|
$
|
(10.4)
|
|
|
$
|
8.3
|
|
|
$
|
0.1
|
|
|
$
|
4.0
|
|
|
$
|
(11.1)
|
|
|
$
|
9.8
|
|
|
$
|
—
|
|
|
$
|
0.5
|
|
|
Amounts excluded from effectiveness testing
|
1.0
|
|
|
(1.2)
|
|
|
0.9
|
|
|
(0.6)
|
|
|
1.2
|
|
|
(2.2)
|
|
|
—
|
|
|
(12.6)
|
|
|
Total cash flow hedge gain (loss) recognized in income
|
(9.4)
|
|
|
7.1
|
|
|
1.0
|
|
|
3.4
|
|
|
(9.9)
|
|
|
7.6
|
|
|
—
|
|
|
(12.1)
|
|
|
Total hedge gain (loss) recognized in income
|
$
|
(9.4)
|
|
|
$
|
7.1
|
|
|
$
|
1.0
|
|
|
$
|
3.4
|
|
|
$
|
(9.9)
|
|
|
$
|
7.6
|
|
|
$
|
—
|
|
|
$
|
(12.1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) recognized in income on derivatives not designated as hedging instruments
|
0.2
|
|
|
0.5
|
|
|
—
|
|
|
(11.4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
$
|
(9.2)
|
|
|
$
|
7.6
|
|
|
$
|
1.0
|
|
|
$
|
(8.0)
|
|
|
$
|
(9.9)
|
|
|
$
|
7.6
|
|
|
$
|
—
|
|
|
$
|
(12.1)
|
|
Balance Sheet Offsetting - We execute derivative contracts with counterparties that consent to a master netting agreement, which permits net settlement of the gross derivative assets against gross derivative liabilities. Each instrument is accounted for individually and assets and liabilities are not offset. As of March 31, 2021 and December 31, 2020, we had no collateralized derivative contracts. The following tables present both gross information and net information of recognized derivative instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(In millions)
|
Gross Amount Recognized
|
|
Gross Amounts Not Offset, Permitted Under Master Netting Agreements
|
|
Net Amount
|
|
Gross Amount Recognized
|
|
Gross Amounts Not Offset, Permitted Under Master Netting Agreements
|
|
Net Amount
|
|
Derivative assets
|
$
|
238.8
|
|
|
$
|
(125.2)
|
|
|
$
|
113.6
|
|
|
$
|
297.9
|
|
|
$
|
(128.7)
|
|
|
$
|
169.2
|
|
|
Derivative liabilities
|
$
|
206.7
|
|
|
$
|
(125.2)
|
|
|
$
|
81.5
|
|
|
$
|
176.3
|
|
|
$
|
(99.3)
|
|
|
$
|
77.0
|
|
NOTE 20. FAIR VALUE MEASUREMENTS
Assets and liabilities measured at fair value on a recurring basis were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(In millions)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Technip Energies
|
$
|
1,249.0
|
|
|
$
|
1,249.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Equity securities(a)
|
24.3
|
|
|
24.3
|
|
|
—
|
|
|
—
|
|
|
23.4
|
|
|
23.4
|
|
|
—
|
|
|
—
|
|
|
Money market fund
|
1.9
|
|
|
—
|
|
|
1.9
|
|
|
—
|
|
|
1.7
|
|
|
—
|
|
|
1.7
|
|
|
—
|
|
|
Stable value fund(b)
|
0.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity debt securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24.2
|
|
|
—
|
|
|
24.2
|
|
|
—
|
|
|
Derivative financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
238.8
|
|
|
—
|
|
|
238.8
|
|
|
—
|
|
|
297.9
|
|
|
—
|
|
|
297.9
|
|
|
—
|
|
|
Assets held for sale
|
47.4
|
|
|
—
|
|
|
—
|
|
|
47.4
|
|
|
47.3
|
|
|
—
|
|
|
—
|
|
|
47.3
|
|
|
Total assets
|
$
|
1,562.2
|
|
|
$
|
1,273.3
|
|
|
$
|
240.7
|
|
|
$
|
47.4
|
|
|
$
|
395.4
|
|
|
$
|
23.4
|
|
|
$
|
323.8
|
|
|
$
|
47.3
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
206.7
|
|
|
—
|
|
|
206.7
|
|
|
—
|
|
|
176.3
|
|
|
—
|
|
|
176.3
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
$
|
206.7
|
|
|
$
|
—
|
|
|
$
|
206.7
|
|
|
$
|
—
|
|
|
$
|
176.3
|
|
|
$
|
—
|
|
|
$
|
176.3
|
|
|
$
|
—
|
|
(a)Includes fixed income and other investments measured at fair value.
(b)Certain investments that are measured at fair value using net asset value per share (or its equivalent) have not been classified in the fair value hierarchy.
Investment in Technip Energies - The fair value of our investment in Technip Energies is based on quoted prices that we have the ability to access in public markets, see Note 11 for further details.
Equity securities - The fair value measurement of our traded securities is based on quoted prices that we have the ability to access in public markets.
Stable value fund and Money market fund - The stable value fund and money market fund are valued at the net asset value of the shares held at the end of the quarter, which is based on the fair value of the underlying investments using information reported by our investment advisor at quarter-end.
Held-to-maturity debt securities - Held-to-maturity debt securities consist of government bonds. These investments are stated at amortized cost, which approximates fair value.
Assets held for sale - The fair value of our assets held for sale was determined using a market approach that took into consideration the expected sales price. As of March 31, 2021, our G1200 vessel is classified as held for sale. In March 2021, we entered into a Memorandum of Agreement to sell the vessel. The agreement is subject to certain conditions precedent to complete the transaction. We expect to complete the sale in the first half of 2021.
Redeemable non-controlling interest - We own a 51% share in Island Offshore Subsea AS that was subsequently renamed to TIOS AS. The non-controlling interest is recorded as mezzanine equity at fair value. The fair value measurement is based upon significant unobservable inputs not observable in the market and is consequently classified as a Level 3 in the fair value measurements hierarchy. As of March 31, 2021 and December 31, 2020, the fair value of our redeemable non-controlling interest was $44.6 million and $43.7 million, respectively.
Derivative financial instruments - We use the income approach as the valuation technique to measure the fair value of foreign currency derivative instruments on a recurring basis. This approach calculates the present value of the future cash flow by measuring the change from the derivative contract rate and the published market indicative currency rate, multiplied by the contract notional values. Credit risk is then incorporated by reducing the derivative’s fair value in asset positions by the result of multiplying the present value of the portfolio by the counterparty’s published credit spread. Portfolios in a liability position are adjusted by the same calculation; however, a spread representing our credit spread is used. Our credit spread, and the credit spread of other counterparties not publicly available, are approximated by using the spread of similar companies in the same industry, of similar size and with the same credit rating.
We currently have no credit-risk-related contingent features in our agreements with the financial institutions that would require us to post collateral for derivative positions in a liability position. See Note 19 for further details.
Nonrecurring Fair Value Measurements
Fair value of long-lived, non-financial assets - Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that carrying amounts of such assets may not be recoverable.
The following summarizes impairments of long-lived assets and related post-impairment fair value for the three
months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2021
|
|
2020
|
|
|
(In millions)
|
Impairment
|
|
Fair Value (a)
|
|
Impairment
|
|
Fair Value (a)
|
|
|
Long-lived assets
|
$
|
18.8
|
|
|
$
|
31.6
|
|
|
$
|
104.6
|
|
|
$
|
269.6
|
|
|
(a)Measured as of the impairment date using the income approach and a 10.8% risk-adjusted rate of interest, resulting in a Level 3 fair value measurement.
Other fair value disclosures
The carrying amounts of cash and cash equivalents, trade receivables, accounts payable, short-term debt, commercial paper, debt associated with our bank borrowings, credit facilities, as well as amounts included in other current assets and other current liabilities that meet the definition of financial instruments, approximate fair value.
Fair value of debt - We use a market approach to determine the fair value of our fixed-rate debt using observable market data, which results in a Level 2 fair value measurement. The estimated fair value of our private placement notes, senior notes and synthetic bonds was $2,097.3 million and $2,199.2 million as of March 31, 2021 and December 31, 2020, respectively.
Credit risk - By their nature, financial instruments involve risk, including credit risk, for non-performance by counterparties. Financial instruments that potentially subject us to credit risk primarily consist of trade receivables and derivative contracts. We manage the credit risk on financial instruments by transacting only with what management believes are financially secure counterparties, requiring credit approvals and credit limits, and monitoring counterparties’ financial condition. Our maximum exposure to credit loss in the event of non-performance by the counterparty is limited to the amount drawn and outstanding on the financial instrument. Allowances for losses on trade receivables are established based on collectability assessments. We mitigate credit risk on derivative contracts by executing contracts only with counterparties that consent to a master netting agreement, which permits the net settlement of gross derivative assets against gross derivative liabilities.
NOTE 21. SUBSEQUENT EVENT
On April 8, 2021, Pursuant to the “Share Purchase Agreement” with BPI, we refunded $100.0 million to BPI as a result of their revised level of investment.
On April 27, 2021 we sold 25 million Technip Energies shares, representing 14% of Technip Energies’ share capital, through a private placement by way of an accelerated bookbuild offering (the “Placement”). The sale price of the shares in the Placement was set at €11.10 per share, yielding total gross proceeds of €277.5 million or $335.2 million.
Concurrently with the Placement, Technip Energies purchased from TechnipFMC 1.8 million shares (equivalent to 1% of share capital) at €11.10 per share, corresponding to the price of the Placement (the “Concurrent Sale to Technip Energies”). The sale of shares to Technip Energies yielded total gross proceeds of €20.0 million or $24.2 million. This purchase was separate from the Placement.
Upon completion of the Placement and the Concurrent Sale to Technip Energies, TechnipFMC retains a direct stake of 55.5 million shares, representing 31% of Technip Energies’ share capital.