Technipfmc Announces Fourth Quarter 2018 Results

Source Press Release
Company TechnipFMC plc 
Tags Capital Spending, Guidance, Strategy - Corporate, Financial & Operating Data
Date February 20, 2019
  • Full-year Company orders of $14.3 billion, up 40 percent year-over-year
  • Strong project execution drives early delivery of Yamal LNG Train 3
  • Non-cash after-tax asset impairment charges of $1.7 billion
  • Full-year distributions of $681 million from dividends and share repurchase

TechnipFMC plc (NYSE: FTI) (Paris: FTI)  (ISIN:GB00BDSFG982) today reported fourth quarter 2018 results.

Total Company revenue was $3,323 million. The Company reported a net loss of $2,259.3 million, or $5.00 per diluted share. These results included total after-tax charges and credits of $2,220.3 million, or $4.91 per diluted share. Adjusted net loss was $39 million, or $0.09 per diluted share.

Total after-tax charges and credits in the quarter of $2,220.3 million were as follows:

1) After-tax charges and credits impacting operating results of $2,006.1 million, which included the following (Exhibit 8):

  • Asset impairments totaling $1,688.8 million for goodwill and other fixed assets;
  • A provision of $280 million as a probable estimate for the aggregate settlement of investigations regarding historical projects; and
  • Restructuring charges, business combination costs, and purchase price accounting adjustments totaling $37.3 million.

2) Charges and credits impacting the tax provision of $214.2 million, which included the following (Exhibit 8):

  • A tax provision for the true-up of U.S. tax reform of $11.8 million; and
  • A tax provision for valuation allowances of $202.4 million.

Adjusted EBITDA, which excludes pre-tax charges and credits, was $342.4 million; adjusted EBITDA margin was 10.3 percent (Exhibit 9).

Other significant pre-tax items impacting the quarter, for which we do not provide guidance, included the following:

  • $38.7 million of foreign exchange losses included in corporate expense, or $0.05 per diluted share on an after-tax basis; and
  • $108.8 million of increased liability payable to joint venture partners included in interest expense, or $0.24 per diluted share on an after-tax basis.

Summary Financial Statements – Fourth Quarter 2018
Reconciliation of U.S. GAAP to non-GAAP financial measures are below and in financial schedules.

Three Months Ended (In millions, except per share amounts)    December 31,
2018 
  December 31,
2017 
  Change   
Revenue    $3,323.0    $3,683.0    (9.8%)   
Net income (loss)    $(2,259.3)    $(153.9)    n/m   
Diluted earnings (loss) per share    $(5.00)    $(0.33)    n/m   
               
Adjusted EBITDA    $342.4    $525.0    (34.8%)   
Adjusted EBITDA margin    10.3%    14.3%    (395 bps)   
Adjusted net income (loss)    $(39.0)    $90.9    n/m   
Adjusted diluted earnings (loss) per share    $(0.09)    $0.20    n/m   
               
Inbound orders    $2,925.1    $2,991.9    (2.2%)   
Backlog    $14,560.0    $12,982.8    12.1%   
               

As previously disclosed, we are cooperating with the U.S., Brazilian, and French authorities in their investigations of potential violations of anticorruption laws relating to historical projects in Brazil, Equatorial Guinea, and Ghana, and Unaoil contracts. We have been informed that these authorities have been coordinating their investigations, which could result in a global resolution.

These matters have progressed to a point where a probable estimate of the aggregate settlement amount with all authorities is $280 million for which we have taken a provision in the fourth quarter and year ended December 31, 2018. These matters involve negotiations with law enforcement authorities in three separate jurisdictions, and there is no certainty that a global settlement will be reached or that settlement will not exceed the provision.

Full Year 2018 Results

Total Company revenue was $12,552.9 million. The Company reported a net loss of $1,921.6 million, or $4.20 per diluted share. These results included total after-tax charges and credits of $2,298.7 million, or $5.02 per diluted share. Adjusted net income was $377.1 million, or $0.82 per diluted share.

Total after-tax charges and credits for the full year of $2,298.7 million were as follows:

1) After-tax charges and credits impacting the operating results of $2,073.1 million, which included the following (Exhibit 8):

  • Asset impairments totaling $1,698.2 million for goodwill and other fixed assets;
  • A provision of $280 million as a probable estimate for the aggregate settlement of investigations regarding historical projects; and
  • Restructuring charges, business combination costs, purchase price accounting adjustments, and a gain on divestitures totaling $94.9 million.

2) Charges and credits impacting the tax provision of $225.6 million, which included the following (Exhibit 8):

  • A tax provision for the true-up of U.S. tax reform of $11.8 million; and
  • A tax provision for valuation allowances of $213.8 million.

Adjusted EBITDA, which excludes charges and credits, was $1,536.8 million; adjusted EBITDA margin was 12.2 percent (Exhibit 10).

Other significant pre-tax items impacting the year, for which we do not provide guidance, included the following:

  • $116.5 million of foreign exchange losses included in corporate expense, or $0.16 per diluted share on an after-tax basis; and
  • $322.3 million of increased liability payable to joint venture partners included in interest expense, or $0.70 per diluted share on an after-tax basis.

Summary Financial Statements – Full Year 2018
Reconciliation of U.S. GAAP to non-GAAP financial measures are below and in financial schedules.

Twelve Months Ended (In millions, except per share amounts)    December 31,
2018 
  December 31,
2017 
  Change   
Revenue    $12,552.9    $15,056.9    (16.6%)   
Net income (loss)    $(1,921.6)    $113.3    n/m   
Diluted earnings (loss) per share    $(4.20)    $0.24    n/m   
               
Adjusted EBITDA    $1,536.8    $1,983.0    (22.5%)   
Adjusted EBITDA margin    12.2%    13.2%    (93 bps)   
Adjusted net income (loss)    $377.1    $603.5    (37.5%)   
Adjusted diluted earnings (loss) per share    $0.82    $1.29    (36.4%)   
               
Inbound orders    $14,291.0    $10,196.3    40.2%   
Backlog    $14,560.0    $12,982.8    12.1%   
               

Doug Pferdehirt, CEO of TechnipFMC, stated, “Many significant achievements contributed to our success in 2018. We exceeded total Company financial objectives for a second consecutive year, largely driven by continued strength in Onshore/Offshore execution as evidenced by early start-up of Trains 2 and 3 for Yamal LNG. We also achieved notable milestones in Subsea, including the successful delivery of the industry’s first full-cycle iEPCI™ projects and commercialization of our new Subsea 2.0™ product platform.”

“Total Company orders were $14.3 billion for the full year, a 40 percent increase compared to the prior year. Orders exceeded revenues in all segments, with Onshore/Offshore securing several key awards in the downstream and petrochemical sectors, driving a 95 percent increase in orders year-over-year. In Surface Technologies, strength outside the Americas drove orders 36 percent higher than the previous year.”

“During the quarter, we progressed on outstanding investigations of historical projects and took a $280 million provision as a probable estimate for the aggregate settlement. We continue to cooperate with all authorities in order to conclude this matter.”

Pferdehirt continued, “In Subsea, the market is rapidly embracing greater project integration. Already in 2019, we have secured new iEPCI™ projects with BP and Lundin – both first-time iEPCI™ customers. We are confident that our unique offering and experience will lead to further growth in our iEPCI™ backlog in the coming year. We also anticipate an acceleration in subsea services growth, driven by both internal investment and increased market activity.”

“The resurgence in LNG activity is confirmed with a new wave of significant LNG project opportunities. Selectivity remains at the core of our project success. With our global footprint, we are tracking greenfield and brownfield projects across four continents, representing a substantial portfolio of opportunities. We will leverage our most successful reference projects, incumbent positions, and client relationships toward those projects that are most strategic to TechnipFMC and offer the highest probability of successful execution.”

“In Surface Technologies, strong order and backlog growth in the second half of 2018 further strengthens our conviction in increased activity outside of the Americas, particularly in the Middle East. Activity in North America continues to moderate. However, we anticipate growth in the second half of 2019, driven in part by additional pipeline capacity in the Permian region.”

“Disciplined capital allocation remains a priority. Capital expenditures are focused on the best opportunities for growth and returns across the markets we serve. In 2018, we also returned $681 million to shareholders through dividend and share repurchase activity.”

Pferdehirt concluded, “Through the hard work and dedication of the more than 37,000 women and men of TechnipFMC, we have done more than simply navigate the industry downturn. We have successfully pioneered a completely new integrated subsea model and restored growth in total Company backlog, positioning us well for further success in 2019 and beyond.”

Operational and Financial Highlights – Fourth Quarter 2018

Subsea 

Financial Highlights
Reconciliation of U.S. GAAP to non-GAAP financial measures are below and in financial schedules.

Three Months Ended (In millions)    December 31,
2018 
  December 31,
2017 
  Change   
Revenue    $1,233.3    $1,292.2    (4.6%)   
Operating profit (loss)    $(1,739.5)    $67.4    n/m   
Adjusted EBITDA    $148.5    $244.1    (39.2%)   
Adjusted EBITDA margin    12.0%    18.9%    (685 bps)   
               
Inbound orders    $880.6    $1,724.8    (48.9%)   
Backlog    $5,999.6    $6,203.9    (3.3%)   
               

Subsea reported fourth quarter revenue of $1,233.3 million. Revenue was down 4.6 percent from the prior year as projects in Africa were completed or progressed further towards completion, largely offset by increased activity in North America, Asia Pacific, and South America.

In the quarter, the Company recorded pre-tax asset impairment charges totaling $1,775.6 million in Subsea. These non-cash charges resulted from our annual fair value assessment of our business and assets; these include impairments to goodwill and fixed assets, including a reduction in the carrying values of certain vessels within our fleet.

Subsea reported an operating loss of $1,739.5 million; included in the operating results are total pre-tax charges of $1,803.1 million. Adjusted EBITDA was $148.5 million with a margin of 12 percent. Adjusted EBITDA declined versus the prior-year quarter primarily due to the execution of more competitively priced backlog, partially offset by merger synergies and other cost reduction activities.

Vessel utilization rate for the fourth quarter was 62 percent, down from 69 percent in the third quarter and 65 percent in the prior-year quarter.

Fourth Quarter Subsea Highlights

  • Total Egina (Nigeria)
    First oil achieved for one of the largest subsea projects to date in West Africa; continuing involvement through a services contract.
  • Total Kaombo (Angola)
    Mobilization of the Skandi Africa in advance of the hookup campaign for the South floating production, storage, and offloading unit (FPSO).

Subsea inbound orders for the quarter were $880.6 million, reflecting the continued strength in small project activity and subsea services. Full-year inbound orders were $5,178.5 million, resulting in a book-to-bill of 1.1.

Subsea Estimated Backlog Scheduling as of December 31, 2018 (In millions)    Consolidated
backlog* 
  Non-
consolidated
backlog** 
 
2019    $3,379.2    $184.7   
2020    $1,382.1    $135.7   
2021 and beyond    $1,238.3    $653.6   
Total    $5,999.6    $974.0   
* Backlog does not capture all revenue potential for subsea services.   
** Non-consolidated backlog reflects the proportional share of backlog related to joint ventures
that is not consolidated due to our minority ownership position. 
 
   

Onshore/Offshore 

Financial Highlights
Reconciliation of U.S. GAAP to non-GAAP financial measures are below and in financial schedules.

Three Months Ended (In millions)    December 31,
2018 
  December 31,
2017 
  Change   
Revenue    $1,672.4    $2,019.5    (17.2%)   
Operating profit    $206.4    $257.2    (19.8%)   
Adjusted EBITDA    $217.2    $294.5    (26.2%)   
Adjusted EBITDA margin    13.0%    14.6%    (160 bps)   
               
Inbound orders    $1,609.4    $874.2    84.1%   
Backlog    $8,090.5    $6,369.1    27.0%   
               

Onshore/Offshore reported fourth quarter revenue of $1,672.4 million. Revenue declined 17.2 percent from the prior-year quarter as we moved closer to completion on major projects, primarily Yamal LNG.

Onshore/Offshore reported operating profit of $206.4 million; adjusted EBITDA was $217.2 million with a margin of 13 percent. Operating profit declined 19.8 percent versus the prior-year quarter, primarily due to the revenue decline and a shift in revenue mix to lower margin project work. Strong project execution continued on Yamal LNG, with all three trains now handed over to the customer; operating results in the period also benefitted from a bonus for completion of further milestones on the project, including Train 3. These same factors drove the year-over-year decline in adjusted EBITDA.

Fourth Quarter Onshore/Offshore Highlights

  • Energean Karish iEPCI™ (Israel)
    Hull cutting ceremony (China); steel cutting ceremonies for the electrical house module (Indonesia) and topsides (Singapore).
  • ENI Coral South FLNG (Mozambique)
    Topsides cutting ceremony in Korea.
  • Equinor Martin Linge (Norway)
    Early occupancy of living quarters; platform’s power supply from shore achieved.

Onshore/Offshore inbound orders for the quarter were $1,609.4 million. Full-year inbound orders were $7,425.9 million, resulting in a book-to-bill of 1.2. The following announced award was included in the period:

  • Neste Renewable Products Facility Expansion (Singapore)
    Significant* Engineering, Procurement support, and Construction management services contract by Neste for the expansion of their renewable products refinery in Singapore. The expansion aims at meeting the market demand for renewable products.
    * A “significant” award ranges between $75 million and $250 million (TechnipFMC share).

The following award was announced during the period and will be included in the first quarter 2019 inbound orders:

  • MIDOR Refinery Expansion and Modernization (Egypt)
    Major* Engineering, Procurement, and Construction (EPC) contract by Middle East Oil Refinery (MIDOR) for the modernization and expansion of their existing complex near Alexandria, Egypt. TechnipFMC has successfully completed the remaining conditions required to enable work to commence on the contract.
    * A “major” award is over $1 billion (TechnipFMC share).

Onshore/Offshore Estimated Backlog Scheduling as of December 31, 2018 (In millions)    Consolidated
backlog 
  Non-
consolidated
backlog* 
 
2019    $5,335.1    $676.1   
2020    $1,732.9    $587.7   
2021 and beyond    $1,022.5    $484.7   
Total    $8,090.5    $1,748.5   
* Non-consolidated backlog reflects the proportional share of backlog related to joint ventures
that is not consolidated due to our minority ownership position. 
 
   

Surface Technologies 

Financial Highlights
Reconciliation of U.S. GAAP to non-GAAP financial measures are below and in financial schedules.

Three Months Ended (In millions)    December 31,
2018 
  December 31,
2017 
  Change   
Revenue    $417.3    $372.3    12.1%   
Operating profit    $38.8    $53.3    (27.2%)   
Adjusted EBITDA    $64.9    $75.8    (14.4%)   
Adjusted EBITDA margin    15.6%    20.4%    (481 bps)   
               
Inbound orders    $435.1    $392.9    10.7%   
Backlog    $469.9    $409.8    14.7%   
               

Surface Technologies reported fourth quarter revenue of $417.3 million. Revenue increased 12.1 percent from the prior-year quarter. Increased drilling activity in North America as well as market share gains drove wellhead product sales higher; sales of hydraulic fracturing rental equipment also moved higher as market share gains more than offset the market decline in completions activity. International revenue growth was driven by pressure control sales and aftermarket services.

Surface Technologies reported operating profit of $38.8 million; adjusted EBITDA was $64.9 million with a margin of 15.6 percent. Operating profit decreased versus the prior-year quarter primarily due to the rapid decline in flowline product sales, which resulted in an unfavorable product mix. The same factor drove the year-over-year decrease in adjusted EBITDA.

Fourth Quarter Surface Technologies Highlights

  • Chevron Frame Agreement (North America)
    Covers the supply of surface wellheads, production trees, and related services in the United States and Canada.

Inbound orders for the quarter were $435.1 million. Full-year inbound orders were $1,686.6 million, resulting in a book-to-bill of 1.1.

Backlog was $469.9 million. Given the short-cycle nature of the business, most orders are quickly converted into sales revenue; longer contracts are typically converted within twelve months.

Corporate and Other Items

Corporate expense in the fourth quarter was $393.6 million. This includes a provision of $280 million as a probable estimate for the aggregate settlement of investigations regarding historical projects, and charges and credits totaling $23.3 million relating to merger and integration costs, restructuring and other severance charges, and purchase price accounting adjustments. Excluding charges and credits, corporate expense was $90.3 million; this included $38.7 million of foreign exchange losses.

Net interest expense was $116.6 million in the quarter, which included an increase in the liability payable to joint venture partners of $108.8 million.

The Company recorded a tax provision during the quarter of $242 million. The provision was impacted by a true-up for U.S. tax reform of $11.8 million and a valuation allowance of $202.4 million.

Total depreciation and amortization for the quarter was $137.9 million, including depreciation and amortization related to purchase price accounting for the merger of $24 million.

Capital expenditures were $112.9 million during the quarter; expenditures were $368.1 million for the full year.

The Company repurchased 2.5 million shares during the quarter for total consideration of $58.4 million. During the quarter, the Company completed the $500 million share repurchase program that was implemented in October 2017. The Board of Directors approved an additional $300 million share repurchase program in December 2018.

Cash flow from operations in the quarter was $159.3 million. The Company ended the period with cash and cash equivalents of $5,540 million; net cash was $1,348.3 million.

2019 Financial Guidance1

The Company’s full-year guidance for 2019 can be found in the table below. The following update is reflected in the outlook:

  • Capital expenditures of approximately $350 million for the full year, a decrease from the previous guidance of approximately $400 million for the full year.

2019 Guidance *Updated February 20, 2019 
 
Subsea    Onshore/Offshore    Surface Technologies 
Revenue in a range of
$5.4 – 5.7 billion 
  Revenue in a range of
$5.7 – 6.0 billion 
  Revenue in a range of
$1.7 – 1.8 billion 
         
EBITDA margin at least
11% (excluding
amortization related
impact of purchase
price accounting, and
other charges and
credits) 
  EBITDA margin at least
12% (excluding
amortization related
impact of purchase
price accounting, and
other charges and
credits) 
  EBITDA margin at least
17% (excluding
amortization related
impact of purchase
price accounting, and
other charges and
credits) 
         
TechnipFMC 
Corporate expense, net $160 – 170 million for the full year (excluding the impact of foreign currency fluctuations) 
         
Net interest expense $40 – 60 million for the full year (excluding the impact of revaluation of partners’ redeemable financial liability) 
         
Tax rate 28 – 32% for the full year (excluding the impact of discrete items) 
         
Capital expenditures* approximately $350 million for the full year 
 
Cash flow from operating activities positive for the full year 
         
Merger integration and restructuring costs approximately $50 million for the full year 
         
Cost synergies $450 million total savings ($220m exit run-rate 12/31/17, $400m exit run-rate 12/31/18, $450m exit run-rate 12/31/19) 

_______________
1 Our guidance measures adjusted EBITDA margin, corporate expense, net (excluding the impact of foreign currency fluctuations), net interest expense excluding the impact of revaluation of partners’ redeemable financial liability, and tax rate (excluding the impact of discrete items) are non-GAAP financial measures. We are unable to provide a reconciliation to comparable GAAP financial measures on a forward-looking basis without unreasonable effort because of the unpredictability of the individual components of the most directly comparable GAAP financial measure and the variability of items excluded from each such measure. Such information may have a significant, and potentially unpredictable, impact on our future financial results.

Teleconference

The Company will host a teleconference on Thursday, February 21, 2019 to discuss the fourth quarter 2018 financial results. The call will begin at 1 p.m. London time (8 a.m. New York time). Dial-in information and an accompanying presentation can be found at .

Webcast access will also be available on our website prior to the start of the call. An archived audio replay will be available after the event at the same website address. In the event of a disruption of service or technical difficulty during the call, information will be posted on our website.

Source: EvaluateEnergy® ©2021 EvaluateEnergy Ltd