TechnipFMC plc — 2018 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2018. The filing also reports unaudited fourth-quarter results. TechnipFMC is a global energy-services company operating in Subsea, Onshore/Offshore, and Surface Technologies. All amounts below are in U.S. dollars.
Key financial results
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Revenue | $12.553 billion | $15.057 billion |
| Gross profit margin | 18.2% | 16.8% |
| Operating income (loss) before interest and taxes | $(1.127) billion | $994.9 million |
| Net income (loss) attributable to TechnipFMC | $(1.922) billion | $113.3 million |
| Diluted earnings (loss) per share | $(4.20) | $0.24 |
| Cash from (used in) operating activities | $(185.4) million | $210.7 million |
| Capital expenditures | $368.1 million | $255.7 million |
| Cash and cash equivalents | $5.540 billion | $6.737 billion |
| Total borrowings | $4.192 billion | $3.855 billion |
| Net cash, a non-GAAP measure | $1.348 billion | $2.882 billion |
| Order backlog | $14.560 billion | $12.983 billion |
FY 2018 results included $1.383 billion of goodwill impairment, $372.9 million of vessel impairment, and a $280 million legal provision. The company also recorded a $322.3 million loss from revaluing a mandatorily redeemable financial liability. These items materially affected reported earnings. Excluding specified charges and credits, management reported adjusted operating profit of $1.078 billion and adjusted EBITDA of $1.537 billion; both are non-GAAP measures.
Fourth quarter: Revenue was $3.323 billion; net loss attributable to TechnipFMC was $2.259 billion and diluted loss per share was $5.00. The quarter’s loss included major impairment charges and the legal provision.
Segments and changes versus the prior year
- Subsea: Revenue fell 18% to $4.840 billion. The segment reported a $1.530 billion operating loss, principally reflecting $1.784 billion of impairment charges. Excluding those charges, operating profit was $254.7 million, down from $460.5 million in 2017, primarily due to lower revenue from the earlier market downturn.
- Onshore/Offshore: Revenue decreased 23% to $6.121 billion as major projects, including Yamal LNG, progressed toward completion. Operating profit rose 2% to $824 million; margin increased to 13.5% from 10.3%, supported by cost control, project execution, and Yamal milestone performance.
- Surface Technologies: Revenue increased 25% to $1.592 billion, while operating profit more than doubled to $172.8 million, reflecting stronger North American activity and cost reductions, partly offset by international pricing pressure.
Consolidated revenue declined 16.6%, while gross margin improved. Inbound orders rose to $14.291 billion from $10.196 billion, led by Onshore/Offshore awards. Year-end backlog increased 12.1%; the company expected to recognize 63.1% of it during 2019. Comparisons with 2017 require care: 2017 includes FMC Technologies only from the merger closing in January, although the difference is limited to the start of that year.
Liquidity, outlook, risks, and unusual items
- Operating cash flow turned negative, primarily amid working-capital movements, including changes in receivables, contract assets, and trade payables. Working capital was negative $759 million at year-end.
- Cash exceeded borrowings by $1.348 billion, down from $2.882 billion a year earlier. The company had $583.9 million of unused capacity under its $2.5 billion revolving credit facility after commercial paper outstanding; it reported compliance with facility covenants.
- Management forecast approximately $350 million of 2019 capital expenditures, excluding contingent spending that could be required for contract awards. The company anticipated increased Subsea activity and orders, continued LNG opportunities, and a possible recovery in North American completions activity in the second half of 2019. These are forward-looking expectations, not guarantees.
- The filing identifies oil and gas prices and customer spending, project execution and fixed-price contract risks, competition and pricing pressure, suppliers and joint ventures, currency movements, and geopolitical, regulatory, environmental, cyber, and Brexit-related uncertainties as risks.
- The company recorded a $280 million provision for potential resolution of anti-corruption investigations involving U.S., Brazilian, and French authorities. A global settlement was not assured, and the ultimate amount could exceed the accrual. A shareholder securities lawsuit had a remaining Section 11 claim seeking unspecified damages; other legal outcomes were described as uncertain.
- Management and the auditor concluded internal control over financial reporting was ineffective at December 31, 2018, due to material weaknesses in period-end reporting and income-tax accounting. Previously identified foreign-exchange and IT-control weaknesses were reported as remediated. The auditor nevertheless gave an unqualified opinion on the financial statements.
- The company paid $238.1 million in dividends and repurchased $442.6 million of shares in 2018. The board extended the repurchase authorization to a total of $800 million and declared a quarterly dividend of $0.13 per share.
Important facts for investors to verify
- Review the assumptions and sensitivity underlying the $1.383 billion goodwill and $372.9 million vessel impairments, especially the outlook and valuation of Subsea assets.
- Track remediation and independent testing of the period-end reporting and income-tax control weaknesses, and whether any restatement or further control issue emerges.
- Monitor resolution of the anti-corruption investigations against the $280 million provision, including potential penalties, compliance conditions, or business impacts.
- Assess the quality, timing, and margins of the $14.560 billion backlog, including customer concentration: Yamal LNG represented more than 10% of 2018 consolidated revenue.
- Watch working-capital conversion, operating cash flow, commercial paper refinancing capacity, and net cash as debt and liquidity needs evolve.
- Compare 2019 activity and order expectations with actual Subsea awards, LNG project sanctions, and North American drilling and completions trends.