TechnipFMC plc — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual filing, not a standalone Q4 filing. Unless noted, figures are U.S. dollars.
Business context
TechnipFMC provided subsea, engineering and construction, and surface technologies for the energy industry. In 2020 it reported Subsea, Technip Energies, and Surface Technologies. The Technip Energies spin-off was completed on February 16, 2021; the company expected to report two segments thereafter: Subsea and Surface Technologies. Technip Energies’ pre-spin-off results were to be presented as discontinued operations beginning in Q1 2021.
Key financial metrics
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $13.051 billion | $13.409 billion |
| Gross profit margin | 14.1% | 18.3% |
| Net loss attributable to TechnipFMC | $3.288 billion | $2.415 billion |
| Loss per diluted share | $7.33 | $5.39 |
| Operating cash flow | $656.9 million | $848.5 million |
| Capital expenditures | $291.8 million | $454.4 million |
| Free cash flow (non-GAAP) | $365.1 million | $394.1 million |
| Cash and cash equivalents | $4.808 billion | $5.190 billion |
| Total debt | $3.954 billion | $4.475 billion |
| Net cash (non-GAAP) | $853.9 million | $714.8 million |
| Order backlog | $21.388 billion | $24.251 billion |
The 2020 loss included $3.083 billion of goodwill impairment and $204.0 million of long-lived-asset impairment. Adjusted operating profit, a non-GAAP measure, was $644.6 million versus $1.054 billion in 2019; adjusted EBITDA was $1.083 billion versus $1.529 billion. The filing cautions that these non-GAAP measures supplement, and do not replace, GAAP results.
Q4 2020: Revenue was $3.426 billion, versus $3.727 billion in Q4 2019. Net loss was $13.9 million and loss attributable to TechnipFMC was $39.3 million; Q4 2019 net loss was $2.430 billion, substantially affected by impairment charges.
Material changes and segment performance
- Revenue declined 2.7% year over year. Subsea revenue fell 0.9% to $5.471 billion; Technip Energies revenue rose 4.0% to $6.520 billion; Surface Technologies revenue fell 34.5% to $1.059 billion.
- Reported segment results were a $2.816 billion Subsea operating loss, $683.6 million Technip Energies operating profit, and a $429.3 million Surface Technologies operating loss. Subsea and Surface losses primarily reflected impairments and other non-recurring charges.
- Subsea inbound orders fell to $4.003 billion from $7.993 billion; Technip Energies inbound orders fell to $5.001 billion from $13.081 billion; Surface Technologies inbound orders fell to $1.061 billion from $1.620 billion. Total inbound orders declined to $10.066 billion from $22.693 billion.
- Goodwill fell to $2.513 billion from $5.598 billion following impairment charges. Total assets decreased to $19.693 billion from $23.519 billion, and TechnipFMC stockholders’ equity fell to $4.154 billion from $7.659 billion.
- Operating cash flow and free cash flow decreased year over year. Cash used in financing was $1.082 billion, including $883.6 million of debt repayments; the annual dividend was reduced by 75% to $0.13 per share.
Outlook, risks and unusual items
- Management expected 2021 Subsea inbound orders to meet or exceed the $4 billion achieved in 2020. It cited improving oil prices and FEED activity, while warning that project sanctioning delays and customer capital discipline remained risks.
- For Surface Technologies, management expected North American revenue to be flat to modestly down in 2021, with international markets expected to provide approximately 65% of segment revenue. It anticipated modest international market growth and improved completions-related performance from adoption of iComplete.
- Management estimated 2021 capital expenditures at approximately $250 million and emphasized cash and liquidity preservation. After the spin-off, it planned to reduce its retained Technip Energies stake over time and use sale proceeds to reduce net leverage.
- COVID-19 caused customer spending cuts, project delays, operational and supply-chain disruptions, and $101.8 million of separately identified direct COVID-related expenses. Oil and gas price volatility, fixed-price contract exposure, backlog execution, foreign exchange, cybersecurity, and debt and covenant constraints were among the disclosed risks.
- After year-end, TechnipFMC issued $1.0 billion of 6.5% senior notes due 2026 and entered a new $1.0 billion revolving credit facility, using proceeds and cash to repay maturing synthetic bonds and $500 million of 2022 notes and to repay most commercial paper borrowings.
- The company disclosed $4.660 billion of performance guarantees and $310.1 million of financial guarantees. It maintained a $70 million provision for an unresolved French anti-corruption investigation relating to historical projects; a settlement could exceed the provision, and criminal proceedings remained possible.
- Arctic LNG represented more than 10% of 2020 consolidated revenue, creating customer/project concentration. The company also retained approximately 49.9% of Technip Energies after the spin-off; the investment’s value and planned reduction were subject to market and transaction risks.
Important facts for investors to verify
- Whether the 2021 Subsea order and recovery outlook materialized, and how much backlog converts to revenue, given COVID-related schedule adjustments.
- How much of the reported loss reflects impairments and other excluded items, and whether adjusted profitability and cash generation are sustainable.
- Post-spin-off debt, liquidity, refinancing costs, covenant headroom, and the use and timing of proceeds from Technip Energies share sales.
- The resolution and ultimate exposure from the French anti-corruption investigation, spin-off indemnities, guarantees, and other contingencies.
- The filing’s accounting estimates are significant: approximately 86% of 2020 revenue came from long-term contracts, whose revenue and margin depend on estimates of costs to complete.