TechnipFMC Announces Fourth Quarter 2018 Results

  • 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

LONDON & PARIS & HOUSTON–(BUSINESS WIRE)–Regulatory News:

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 www.technipfmc.com.

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.

###

About TechnipFMC

TechnipFMC is a global leader in subsea, onshore/offshore, and
surface projects. With our proprietary technologies and production
systems, integrated expertise, and comprehensive solutions, we are
transforming our clients’ project economics.

We are uniquely positioned to deliver greater efficiency across
project lifecycles from concept to project delivery and beyond. Through
innovative technologies and improved efficiencies, our offering unlocks
new possibilities for our clients in developing their oil and gas
resources.

Each of our more than 37,000 employees is driven by a steady
commitment to clients and a culture of purposeful innovation,
challenging industry conventions, and rethinking how the best results
are achieved.

To learn more about us and how we are enhancing the performance of
the world’s energy industry, go to TechnipFMC.com and follow us on
Twitter @TechnipFMC.

This communication contains “forward-looking statements” as defined
in Section 27A of the United States Securities Act of 1933, as amended,
and Section 21E of the United States Securities Exchange Act of 1934, as
amended. Words such as “guidance,” “confident,” “believe,” “expect,”
“anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could,”
“may,” “will,” “likely,” “predicated,” “estimate,” “outlook” and similar
expressions are intended to identify forward-looking statements, which
are generally not historical in nature. Such forward-looking statements
involve significant risks, uncertainties and assumptions that could
cause actual results to differ materially from our historical experience
and our present expectations or projections, including the following
known material factors:

  • the remedial measures to address our material weaknesses could be
    insufficient or additional issues relating to disclosure controls and

Contacts

Investor relations
Matt Seinsheimer
Vice President
Investor Relations
Tel: +1 281 260 3665
Email: Matt
Seinsheimer

Phillip Lindsay
Director Investor
Relations (Europe)
Tel: +44 (0) 20 3429 3929
Email: Phillip
Lindsay

Media relations
Christophe Bélorgeot
Senior Vice
President Corporate Engagement
Tel: +33 1 47 78 39 92
Email: Christophe
Belorgeot

Delphine Nayral
Director Public Relations
Tel:
+33 1 47 78 34 83
Email: Delphine
Nayral

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