Regulatory News:
TechnipFMC plc (“TechnipFMC”) (NYSE:FTI) (Paris:FTI)
(ISIN:GB00BDSFG982) announces that its U.K. Annual Report and IFRS
Financial Statements for the period ended 31 December 2018
(“2018 Annual Report”) have been published.
A copy of the 2018 Annual Report has been submitted to the U.K.
National Storage Mechanism and is, or will shortly be, available
for inspection at www.morningstar.co.uk/uk/NSM, and can also be
found on the TechnipFMC website
(https://investors.technipfmc.com/events-presentations/agm).
TechnipFMC’s annual general meeting will be held on 10:00 a.m.,
London time, on Wednesday, 1 May 2019 at TechnipFMC’s offices at
One St. Paul’s Churchyard, London, EC4M 8AP, United Kingdom.
Compliance with Disclosure and Transparency Rule (“DTR”)
6.3.5 – Extracts from the 2018 Annual Report
The information below, which is extracted from the 2018 Annual
Report, is included solely for the purpose of complying with DTR
6.3.5 and the requirements it imposes on issuers as to how to make
public annual financial reports. It should be read in conjunction
with TechnipFMC’s preliminary results announcement released on 20
February 2019. This announcement is not a substitute for reading
the full 2018 Annual Report. Page, note, and section references in
the text below refer to page numbers, note and section references
in the 2018 Annual Report.
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.
Appendix A – Directors’ Responsibility Statements
The directors are responsible for our U.K. Annual Report,
containing the Strategic Report, this Directors’ Report, the
Directors’ Remuneration Report, the Corporate Governance Report,
and the financial statements contained herein, in accordance with
applicable law and regulations. The Companies Act requires the
directors to prepare financial statements for each financial year.
Under that law the directors have prepared the consolidated
financial statements in accordance with International Financial
Reporting Standards as issued by the International Accounting
Standards Board and as adopted by the European Union and Company
financial statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards,
comprising FRS 101 “Reduced Disclosure Framework”, and applicable
law).
Under the Companies Act, the directors must not approve
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and its
consolidated subsidiaries and of the profit or loss of the Company
and its consolidated subsidiaries for that period.
In preparing these financial statements, the directors are
required to:
- select suitable accounting policies and
then apply them consistently;
- make judgements and accounting
estimates that are reasonable and prudent;
- state whether applicable IFRS as
adopted by the European Union have been followed for the
consolidated financial statements and United Kingdom Accounting
Standards, comprising FRS 101, have been followed for the Company
financial statements, subject to any material departures disclosed
and explained in the financial statements; and
- prepare the financial statements on the
going concern basis unless it is inappropriate to presume that the
Company and its consolidated subsidiaries will continue in
business.
The directors are responsible for ensuring that the Company
keeps adequate accounting records that are sufficient to show and
explain the Company’s and its consolidated subsidiaries’
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and its consolidated subsidiaries
and enable them to ensure that the financial statements and the
U.K. Annual Report comply with the Companies Act and, as regards
the consolidated financial statements, Article 4 of the E.U. IAS
Regulation. They are also responsible for safeguarding the assets
of the Company and its consolidated subsidiaries and for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The directors are responsible for the maintenance and integrity
of the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Statement as to the U.K. Annual
Report
The directors consider that this U.K. Annual Report and
financial statements, taken as a whole, is fair, balanced, and
understandable and provides the information necessary for
shareholders to assess the Company’s and its consolidated
subsidiaries’ performance, business model and strategy.
Each of the directors, whose names and functions are listed in
the section entitled “Directors” of this Report, confirms that to
the best of his/her knowledge:
a. the financial statements, prepared in accordance with
applicable accounting standards, give a true and fair view of the
assets, liabilities, financial position, and profit or loss of the
Company and the undertakings included in the consolidation taken as
a whole; and
b. the Directors’ Report and Strategic Report include a fair
review of the development or performance of the business and the
position of the Company and the undertakings included in the
consolidation taken as a whole, together with a description of the
principal risks and uncertainties that it faces.
Statement as to Disclosure to
Auditors
The directors confirm that:
c. so far as they are each aware, there is no relevant audit
information of which the Company’s and its consolidated
subsidiaries’ auditor is unaware; and
d. they have each taken all the steps that they ought to have
taken as a director in order to make themselves aware of any
relevant audit information and to establish that the Company’s and
its consolidated subsidiaries’ auditor is aware of that
information.
Appendix B – Principal risks and uncertainties
The principal risks and uncertainties at set out in the
Strategic Report of the 2018 Annual Report are set out below in
full and unedited text.
You should carefully consider the specific risks and
uncertainties set forth below and the other information contained
within this Strategic Report, as these are important factors that
could cause the Company’s actual results, performance or
achievements to differ materially from our expected or historical
results.
We operate in a highly competitive environment and
unanticipated changes relating to competitive factors in our
industry, including ongoing industry consolidation, may impact our
results of operations.
We compete on the basis of a number of different factors, such
as product offerings, project execution, customer service, and
price. In order to compete effectively we must develop and
implement innovative technologies and processes, and execute our
clients’ projects effectively. We can give no assurances that we
will continue to be able to compete effectively with the products
and services or prices offered by our competitors.
Our industry, including our customers and competitors, has
experienced unanticipated changes in recent years. Moreover, the
industry is undergoing vertical and horizontal consolidation to
create economies of scale and control the value chain, which may
affect demand for our products and services because of price
concessions for our competitors or decreased customer capital
spending. This consolidation activity could impact our ability to
maintain market share, maintain or increase pricing for our
products and services or negotiate favorable contract terms with
our customers and suppliers, which could have a significant
negative impact on our results of operations, financial condition
or cash flows. We are unable to predict what effect consolidations
and other competitive factors in the industry may have on prices,
capital spending by our customers, our selling strategies, our
competitive position, our ability to retain customers or our
ability to negotiate favorable agreements with our customers.
Demand for our products and services depends on oil and gas
industry activity and expenditure levels, which are directly
affected by trends in the demand for and price of crude oil and
natural gas.
We are substantially dependent on conditions in the oil and gas
industry, including (i) the level of exploration, development and
production activity, (ii) capital spending, and (iii) the
processing of oil and natural gas in refining units, petrochemical
sites, and natural gas liquefaction plants by energy companies that
are our customers. Any substantial or extended decline in these
expenditures may result in the reduced pace of discovery and
development of new reserves of oil and gas and the reduced
exploration of existing wells, which could adversely affect demand
for our products and services and, in certain instances, result in
the cancellation, modification, or re-scheduling of existing orders
in our backlog. These factors could have an adverse effect on our
revenue and profitability. The level of exploration, development,
and production activity is directly affected by trends in oil and
natural gas prices, which historically have been volatile and are
likely to continue to be volatile in the future.
Factors affecting the prices of oil and natural gas include, but
are not limited to, the following:
- demand for hydrocarbons, which is
affected by worldwide population growth, economic growth rates, and
general economic and business conditions;
- costs of exploring for, producing, and
delivering oil and natural gas;
- political and economic uncertainty, and
socio-political unrest;
- government policies and subsidies
related to the production, use, and exportation/importation of oil
and natural gas;
- available excess production capacity
within the Organization of Petroleum Exporting Countries (“OPEC”)
and the level of oil production by non-OPEC countries;
- oil refining and transportation
capacity and shifts in end-customer preferences toward fuel
efficiency and the use of natural gas;
- technological advances affecting energy
consumption;
- development, exploitation, and relative
price, and availability of alternative sources of energy and our
customers’ shift of capital to the development of these
sources;
- volatility in, and access to, capital
and credit markets, which may affect our customers’ activity
levels, and spending for our products and services; and
- natural disasters.
The oil and gas industry has historically experienced periodic
downturns, which have been characterized by diminished demand for
oilfield services and downward pressure on the prices we charge.
While oil and natural gas prices have recently started to rebound
from the downturn that began in 2014, the market remains quite
volatile and the sustainability of the price recovery and business
activity levels is dependent on variables beyond our control, such
as geopolitical stability, OPEC’s actions to regulate its
production capacity, changes in demand patterns, and international
sanctions and tariffs. Continued volatility or any future reduction
in demand for oilfield services and could further adversely affect
our financial condition, results of operations, or cash flows.
Our success depends on our ability to develop, implement, and
protect new technologies and services.
Our success depends on the ongoing development and
implementation of new product designs, including the processes used
by us to produce and market our products, and on our ability to
protect and maintain critical intellectual property assets related
to these developments. If we are not able to obtain patent, trade
secret or other protection of our intellectual property rights, if
our patents are unenforceable or the claims allowed under our
patents are not sufficient to protect our technology, or if we are
not able to adequately protect our patents or trade secrets, we may
not be able to continue to develop our services, products and
related technologies. Additionally, our competitors may be able to
independently develop technology that is similar to ours without
infringing on our patents or gaining access to our trade secrets.
If any of these events occurs, we may be unable to meet evolving
industry requirements or do so at prices acceptable to our
customers, which could adversely affect our financial condition,
results of operations, and cash flows.
The industries in which we operate or have operated expose us
to potential liabilities, including the installation or use of our
products, which may not be covered by insurance or may be in excess
of policy limits, or for which expected recoveries may not be
realized.
We are subject to potential liabilities arising from, among
other possibilities, equipment malfunctions, equipment misuse,
personal injuries, and natural disasters, any of which may result
in hazardous situations, including uncontrollable flows of gas or
well fluids, fires, and explosions. Although we have obtained
insurance against many of these risks, our insurance may not be
adequate to cover our liabilities. Further, the insurance may not
generally be available in the future or, if available, premiums may
not be commercially justifiable. If we incur substantial liability
and the damages are not covered by insurance or are in excess of
policy limits, or if we were to incur liability at a time when we
are not able to obtain liability insurance, such potential
liabilities could have a material adverse effect on our business,
results of operations, financial condition or cash flows.
We may lose money on fixed-price contracts.
As customary for some of our projects, we often agree to provide
products and services under fixed-price contracts. We are subject
to material risks in connection with such fixed-price contracts. It
is not possible to estimate with complete certainty the final cost
or margin of a project at the time of bidding or during the early
phases of its execution. Actual expenses incurred in executing
these fixed-price contracts can vary substantially from those
originally anticipated for several reasons including, but not
limited to, the following:
- unforeseen additional costs related to
the purchase of substantial equipment necessary for contract
fulfillment or labor shortages in the markets for where the
contracts are performed;
- mechanical failure of our production
equipment and machinery;
- delays caused by local weather
conditions and/or natural disasters (including earthquakes and
floods); and
- a failure of suppliers, subcontractors,
or joint venture partners to perform their contractual
obligations.
The realization of any material risks and unforeseen
circumstances could also lead to delays in the execution schedule
of a project. We may be held liable to a customer should we fail to
meet project milestones or deadlines or to comply with other
contractual provisions. Additionally, delays in certain projects
could lead to delays in subsequent projects for which production
equipment and machinery currently being utilized on a project were
intended.
Pursuant to the terms of fixed-price contracts, we are not
always able to increase the price of the contract to reflect
factors that were unforeseen at the time its bid was submitted, and
this risk may be heightened for projects with longer terms.
Depending on the size of a project, variations from estimated
contract performance, or variations in multiple contracts, could
have a significant impact on our financial condition, results of
operations or cash flows.
New capital asset construction projects for vessels and
manufacturing facilities are subject to risks, including delays and
cost overruns, which could have a material adverse effect on our
financial condition, or results of operations.
We regularly carry out capital asset construction projects to
maintain, upgrade, and develop our asset base, and such projects
are subject to risks of delay and cost overruns that are inherent
to any large construction project, and are the result of numerous
factors including, but not limited to, the following:
- shortages of key equipment, materials
or skilled labor;
- unscheduled delays in the delivery or
ordered materials and equipment;
- design and engineering issues; and
- shipyard delays and performance
issues.
Failure to complete construction in time, or the inability to
complete construction in accordance with its design specifications,
may result in loss of revenue. Additionally, capital expenditures
for construction projects could materially exceed the initially
planned investments or can result in delays in putting such assets
into operation.
Our failure to timely deliver our backlog could affect future
sales, profitability, and relationships with our customers.
Many of the contracts we enter into with our customers require
long manufacturing lead times due to complex technical and
logistical requirements. These contracts may contain clauses
related to liquidated damages or financial incentives regarding
on-time delivery, and a failure by us to deliver in accordance with
customer expectations could subject us to liquidated damages or
loss of financial incentives, reduce our margins on these
contracts, or result in damage to existing customer relationships.
The ability to meet customer delivery schedules for this backlog is
dependent upon a number of factors, including, but not limited to,
access to the raw materials required for production, an adequately
trained and capable workforce, subcontractor performance, project
engineering expertise and execution, sufficient manufacturing plant
capacity, and appropriate planning and scheduling of manufacturing
resources. Failure to deliver backlog in accordance with
expectations could negatively impact our financial performance.
We face risks relating to our reliance on subcontractors,
suppliers, and our joint venture partners.
We generally rely on subcontractors, suppliers, and our joint
venture partners for the performance of our contracts. Although we
are not dependent upon any single supplier, certain geographic
areas of our business or a project or group of projects may depend
heavily on certain suppliers for raw materials or semi-finished
goods.
Any difficulty in engaging suitable subcontractors or acquiring
equipment and materials could compromise our ability to generate a
significant margin on a project or to complete such project within
the allocated timeframe. If subcontractors, suppliers or joint
venture partners refuse to adhere to their contractual obligations
with us or are unable to do so due to a deterioration of their
financial condition, we may be unable to find a suitable
replacement at a comparable price, or at all. Moreover, the failure
of one of our joint venture partners to perform their obligations
in a timely and satisfactory manner could lead to additional
obligations and costs being imposed on us as we may be obligated to
assume our defaulting partner’s obligations or compensate our
customers.
Any delay, failure to meet contractual obligations, or other
event beyond our control or not foreseeable by us, that is
attributable to a subcontractor, supplier or joint venture partner,
could lead to delays in the overall progress of the project and/or
generate significant extra costs. Even if we are entitled to make a
claim for these extra costs against the defaulting supplier,
subcontractor or joint venture partner, we may be unable to recover
the entirety of these costs and this could materially adversely
affect our business, financial condition or results of
operations.
Our businesses are dependent on the continuing services of
certain of our key managers and employees.
We depend on key personnel. The loss of any key personnel could
adversely impact our business if we are unable to implement key
strategies or transactions in their absence. The loss of qualified
employees or failure to retain and motivate additional
highly-skilled employees required for the operation and expansion
of our business could hinder our ability to successfully conduct
research activities and develop marketable products and
services.
Pirates endanger our maritime employees and assets.
We face material piracy risks in the Gulf of Guinea, the Somali
Basin, and the Gulf of Aden, and, to a lesser extent, in Southeast
Asia, Malacca, and the Singapore Straits. Piracy represents a risk
for both our projects and our vessels, which operate and transport
through sensitive maritime areas. Such risks have the potential to
significantly harm our crews and to negatively impact the execution
schedule for our projects. If our maritime employees or assets are
endangered, additional time may be required to find an alternative
solution, which may delay project realization and negatively impact
our business, financial condition, or results of operations.
Seasonal and weather conditions could adversely affect demand
for our services and operations.
Our business may be materially affected by variation from normal
weather patterns, such as cooler or warmer summers and winters.
Adverse weather conditions, such as hurricanes in the Gulf of
Mexico or extreme winter conditions in Canada, Russia, and the
North Sea, may interrupt or curtail our operations, or our
customers’ operations, cause supply disruptions or loss of
productivity, and may result in a loss of revenue or damage to our
equipment and facilities, which may or may not be insured. Any of
these events or outcomes could have a material adverse effect on
our business, financial condition, cash flows, and results of
operations.
Due to the types of contracts we enter into and the markets
in which we operate, the cumulative loss of several major
contracts, customers, or alliances may have an adverse effect on
our results of operations.
We often enter into large, long-term contracts that,
collectively, represent a significant portion of our revenue. These
agreements, if terminated or breached, may have a larger impact on
our operating results or our financial condition than shorter-term
contracts due to the value at risk. Moreover, the global market for
the production, transportation, and transformation of hydrocarbons
and by-products, as well as the other industrial markets in which
we operate, is dominated by a small number of companies. As a
result, our business relies on a limited number of customers. If we
were to lose several key contracts, customers, or alliances over a
relatively short period of time, we could experience a significant
adverse impact on our financial condition, results of operations,
or cash flows.
Our operations require us to comply with numerous
regulations, violations of which could have a material adverse
effect on our financial condition, results of operations, or cash
flows.
Our operations and manufacturing activities are governed by
international, regional, transnational, and national laws and
regulations in every place where we operate relating to matters
such as environmental protection, health and safety, labor and
employment, import/export controls, currency exchange, bribery and
corruption, and taxation. These laws and regulations are complex,
frequently change, and have tended to become more stringent over
time. In the event the scope of these laws and regulations expand
in the future, the incremental cost of compliance could adversely
impact our financial condition, results of operations, or cash
flows.
Our international operations are subject to anti-corruption laws
and regulations, such as the U.S. Foreign Corrupt Practices Act
(“FCPA”), the U.K. Bribery Act of 2010 (the “Bribery Act”), the
anti-corruption provisions of French law n° 2016-1691 dated
December 9, 2016 relating to Transparency, Anti-corruption and
Modernization of the Business Practice (“Sapin II Law”), the
Brazilian Anti-Bribery Act (also known as the Brazilian Clean
Company Act), and economic and trade sanctions, including those
administered by the United Nations, the European Union, the Office
of Foreign Assets Control of the U.S. Department of the
Treasury (“U.S. Treasury”), and the U.S. Department of State. The
FCPA prohibits providing anything of value to foreign officials for
the purposes of obtaining or retaining business or securing any
improper business advantage. We may deal with both governments and
state-owned business enterprises, the employees of which are
considered foreign officials for purposes of the FCPA. The
provisions of the Bribery Act extend beyond bribery of foreign
public officials and are more onerous than the FCPA in a number of
other respects, including jurisdiction, non-exemption of
facilitation payments, and penalties. Economic and trade sanctions
restrict our transactions or dealings with certain sanctioned
countries, territories, and designated persons.
As a result of doing business in foreign countries, including
through partners and agents, we are exposed to a risk of violating
anti-corruption laws and sanctions regulations. Some of the
international locations in which we currently or may, in the
future, operate, have developing legal systems and may have higher
levels of corruption than more developed nations. Our continued
expansion and worldwide operations, including in developing
countries, our development of joint venture relationships
worldwide, and the employment of local agents in the countries in
which we operate increases the risk of violations of
anti-corruption laws and economic and trade sanctions. Violations
of anti-corruption laws and economic and trade sanctions are
punishable by civil penalties, including fines, denial of export
privileges, injunctions, asset seizures, debarment from government
contracts (and termination of existing contracts), and revocations
or restrictions of licenses, as well as criminal fines and
imprisonment. In addition, any major violations could have a
significant impact on our reputation and consequently on our
ability to win future business.
We have implemented internal controls designed to minimize and
detect potential violations of laws and regulations in a timely
manner but we can provide no assurance that such policies and
procedures will be followed at all times or will effectively detect
and prevent violations of the applicable laws by one or more of our
employees, consultants, agents, or partners. The occurrence of any
such violation could subject us to penalties and material adverse
consequences on our business, financial condition, or results of
operations.
Compliance with environmental laws and regulations may
adversely affect our business and results of operations.
Environmental laws and regulations in various countries affect
the equipment, systems, and services we design, market, and sell,
as well as the facilities where we manufacture our equipment and
systems, and any other operations we undertake. We are required to
invest financial and managerial resources to comply with
environmental laws and regulations, and believe that we will
continue to be required to do so in the future. Failure to comply
with these laws and regulations may result in the assessment of
administrative, civil, and criminal penalties, the imposition of
remedial obligations, the issuance of orders enjoining our
operations, or other claims. These laws and regulations, as well as
the adoption of new legal requirements or other laws and
regulations affecting exploration and development of drilling for
crude oil and natural gas, are becoming increasingly strict and
could adversely affect our business and operating results by
increasing our costs, limiting the demand for our products and
services, or restricting our operations.
Existing or future laws and regulations relating to
greenhouse gas emissions and climate change may adversely affect
our business.
Existing or future laws concerning the release of greenhouse gas
emissions or that concern climate change (including laws and
regulations that seek to mitigate the effects of climate change)
may adversely impact demand for the equipment, systems and services
we design, market and sell. For example, oil and natural gas
exploration and production may decline as a result of such laws and
regulations and as a consequence demand for our equipment, systems
and services may also decline. In addition, such laws and
regulations may also result in more onerous obligations with
respect to our operations, including the facilities where we
manufacture our equipment and systems. Such decline in demand for
our equipment, systems and services and such onerous obligations in
respect of our operations may adversely affect our financial
condition, results of operations and cash flows.
Disruptions in the political, regulatory, economic, and
social conditions of the countries in which we conduct business
could adversely affect our business or results of
operations.
We operate in various countries across the world. Instability
and unforeseen changes in any of the markets in which we conduct
business, including economically and politically volatile areas
could have an adverse effect on the demand for our services and
products, our financial condition, or our results of operations.
These factors include, but are not limited to, the following:
- nationalization and expropriation;
- potentially burdensome taxation;
- inflationary and recessionary markets,
including capital and equity markets;
- civil unrest, labor issues, political
instability, terrorist attacks, cyber-terrorism, military activity,
and wars;
- supply disruptions in key oil producing
countries;
- the ability of OPEC to set and maintain
production levels and pricing;
- trade restrictions, trade protection
measures, price controls, or trade disputes;
- sanctions, such as prohibitions or
restrictions by the United States against countries that are the
targets of economic sanctions, or are designated as state sponsors
of terrorism;
- foreign ownership restrictions;
- import or export licensing
requirements;
- restrictions on operations, trade
practices, trade partners, and investment decisions resulting from
domestic and foreign laws, and regulations;
- regime changes;
- changes in, and the administration of,
treaties, laws, and regulations;
- inability to repatriate income or
capital;
- reductions in the availability of
qualified personnel;
- foreign currency fluctuations or
currency restrictions; and
- fluctuations in the interest rate
component of forward foreign currency rates.
DTC and Euroclear Paris may cease to act as depository and
clearing agencies for our shares.
Our shares were issued into the facilities of The Depository
Trust Company (“DTC”) with respect to shares listed on the NYSE and
Euroclear with respect to shares listed on Euronext Paris (DTC and
Euroclear being referred to as the “Clearance Services”). The
Clearance Services are widely used mechanisms that allow for rapid
electronic transfers of securities between the participants in
their respective systems, which include many large banks and
brokerage firms. The Clearance Services have general discretion to
cease to act as a depository and clearing agencies for our shares.
If either of the Clearance Services determine at any time that our
shares are not eligible for continued deposit and clearance within
its facilities, then we believe that our shares would not be
eligible for continued listing on the NYSE or Euronext Paris, as
applicable, and trading in our shares would be disrupted. Any such
disruption could have a material adverse effect on the trading
price of our shares.
The United Kingdom’s proposed withdrawal from the European
Union may have a negative effect on global economic conditions,
financial markets, and our business.
We are based in the United Kingdom and have operational
headquarters in Paris, France; Houston, Texas, United States; and
in London, United Kingdom, with worldwide operations, including
material business operations in Europe. In June 2016, a majority of
voters in the United Kingdom elected to withdraw from the European
Union in a national referendum (“Brexit”). The referendum was
advisory, and the United Kingdom government served notice under
Article 50 of the Treaty of the European Union in March 2017 to
formally initiate a withdrawal process. The United Kingdom and the
European Union have had a two-year period under Article 50 to
negotiate the terms for the United Kingdom’s withdrawal from the
European Union. The withdrawal agreement and political declaration
that were endorsed at a special meeting of the European Council on
November 25, 2018 did not receive the approval of the United
Kingdom Parliament in January 2019. Further discussions are
ongoing, although the European Commission has stated that the
European Union will not reopen the withdrawal agreement. Any
extension of the negotiation period for withdrawal will require the
consent of the remaining 27 member states of the European Union.
Brexit has created significant uncertainty about the future
relationship between the United Kingdom and the European Union and
has given rise to calls for certain regions within the United
Kingdom to preserve their place in the European Union by separating
from the United Kingdom.
These developments, or the perception that any of them could
occur, could have a material adverse effect on global economic
conditions and the stability of the global financial markets and
could significantly reduce global market liquidity and restrict the
ability of key market participants to operate in certain financial
markets. Asset valuations, currency exchange rates, and credit
ratings may be especially subject to increased market volatility.
Lack of clarity about applicable future laws, regulations, or
treaties as the United Kingdom negotiates the terms of a
withdrawal, as well as the operation of any such rules pursuant to
any withdrawal terms, including financial laws and regulations, tax
and free trade agreements, intellectual property rights, supply
chain logistics, environmental, health and safety laws and
regulations, immigration laws, employment laws, and other rules
that would apply to us and our subsidiaries, could increase our
costs, restrict our access to capital within the United Kingdom and
the European Union, depress economic activity, and further decrease
foreign direct investment in the United Kingdom. For example,
withdrawal from the European Union could, depending on the
negotiated terms of such withdrawal, eliminate the benefit of
certain tax-related E.U. directives currently applicable to U.K.
companies such as us, including the Parent-Subsidiary Directive and
the Interest and Royalties Directive, which could, subject to any
relief under an available tax treaty, raise our tax costs.
If the United Kingdom and the European Union are unable to
negotiate mutually acceptable withdrawal terms or if other E.U.
member states pursue withdrawal, barrier-free access between the
United Kingdom and other E.U. member states or within the European
Economic Area overall could be diminished or eliminated. Any of
these factors could have a material adverse effect on our business,
financial condition, and results of operations.
As an English public limited company, we must meet certain
additional financial requirements before we may declare dividends
or repurchase shares and certain capital structure decisions may
require stockholder approval which may limit our flexibility to
manage our capital structure. We may not be able to pay
dividends or repurchase shares of our ordinary shares in accordance
with our announced intent, or at all.
Under English law, we will only be able to declare dividends,
make distributions, or repurchase shares (other than out of the
proceeds of a new issuance of shares for that purpose) out of
“distributable profits.” Distributable profits are a company’s
accumulated, realized profits, to the extent that they have not
been previously utilized by distribution or capitalization, less
its accumulated, realized losses, to the extent that they have not
been previously written off in a reduction or reorganization of
capital duly made. In addition, as a public limited company
incorporated in England and Wales, we may only make a distribution
if the amount of our net assets is not less than the aggregate of
our called-up share capital and non-distributable reserves and to
the extent that the distribution does not reduce the amount of
those assets to less than that aggregate.
Following the Merger, we implemented a court-approved reduction
of our capital, which was completed on June 29, 2017, in order to
create distributable profits to support the payment of possible
future dividends or future share repurchases. Our articles of
association permit us by ordinary resolution of the stockholders to
declare dividends, provided that the directors have made a
recommendation as to its amount. The dividend shall not exceed the
amount recommended by the Board of Directors. The directors may
also decide to pay interim dividends if it appears to them that the
profits available for distribution justify the payment. When
recommending or declaring payment of a dividend, the directors are
required under English law to comply with their duties, including
considering our future financial requirements.
In addition, the Board of Directors’ determinations regarding
dividends and share repurchases will depend on a variety of other
factors, including our net income, cash flow generated from
operations or other sources, liquidity position, and potential
alternative uses of cash, such as acquisitions, as well as economic
conditions and expected future financial results. Our ability to
declare and pay future dividends and make future share repurchases
will depend on our future financial performance, which in turn
depends on the successful implementation of our strategy and on
financial, competitive, regulatory, technical, and other factors,
general economic conditions, demand and selling prices for our
products and services, and other factors specific to our industry
or specific projects, many of which are beyond our control.
Therefore, our ability to generate cash depends on the performance
of our operations and could be limited by decreases in our
profitability or increases in costs, regulatory changes, capital
expenditures, or debt servicing requirements.
Any failure to pay dividends or repurchase shares of our
ordinary shares could negatively impact our reputation, harm
investor confidence in us, and cause the market price of our
ordinary shares to decline.
Our existing and future debt may limit cash flow available to
invest in the ongoing needs of our business and could prevent us
from fulfilling our obligations under our outstanding debt.
We have substantial existing debt. As of December 31, 2018,
after giving effect to the Merger, our total debt is $4.2 billion.
We also have the capacity under our $2.5 billion credit facility,
in addition to our bilateral facilities to incur substantial
additional debt. Our level of debt could have important
consequences. For example, it could:
- make it more difficult for us to make
payments on our debt;
- require us to dedicate a substantial
portion of our cash flow from operations to the payment of debt
service, reducing the availability of our cash flow to fund working
capital, capital expenditures, acquisitions, distributions, and
other general partnership purposes;
- increase our vulnerability to adverse
economic or industry conditions;
- limit our ability to obtain additional
financing to enable us to react to changes in our business; or
- place us at a competitive disadvantage
compared to businesses in our industry that have less debt.
Additionally, any failure to meet required payments on our debt
or to comply with any covenants in the instruments governing our
debt, could result in an event of default under the terms of those
instruments. In the event of such default, the holders of such debt
could elect to declare all the amounts outstanding under such
instruments to be due and payable.
The London Inter-bank Offered Rate (“LIBOR”) and certain other
interest “benchmarks” may be subject to regulatory guidance and/or
reform that could cause interest rates under our current or future
debt agreements to perform differently than in the past or cause
other unanticipated consequences. The United Kingdom’s Financial
Conduct Authority, which regulates LIBOR, has announced that it
intends to stop encouraging or requiring banks to submit LIBOR
rates after 2021, and it is unclear if LIBOR will cease to exist or
if new methods of calculating LIBOR will evolve. If LIBOR ceases to
exist or if the methods of calculating LIBOR change from their
current form, interest rates on our current or future debt
obligations may be adversely affected.
A downgrade in our debt rating could restrict our ability to
access the capital markets.
The terms of our financing are, in part, dependent on the credit
ratings assigned to our debt by independent credit rating agencies.
We cannot provide assurance that any of our current credit ratings
will remain in effect for any given period of time or that a rating
will not be lowered or withdrawn entirely by a rating agency.
Factors that may impact our credit ratings include debt levels,
capital structure, planned asset purchases or sales, near- and
long-term production growth opportunities, market position,
liquidity, asset quality, cost structure, product mix, customer and
geographic diversification, and commodity price levels. A downgrade
in our credit ratings, particularly to non-investment grade levels,
could limit our ability to access the debt capital markets or
refinance our existing debt or cause us to refinance or issue debt
with less favorable terms and conditions. Moreover, our revolving
credit agreement includes an increase in interest rates if the
ratings for our debt are downgraded, which could have an adverse
effect on our results of operations. An increase in the level of
our indebtedness and related interest costs may increase our
vulnerability to adverse general economic and industry conditions
and may affect our ability to obtain additional financing, as well
as have a material adverse effect on our business, financial
condition, and results of operations.
Uninsured claims and litigation against us, including
intellectual property litigation, could adversely impact our
financial condition, results of operations, or cash flows.
We could be impacted by the outcome of pending litigation, as
well as unexpected litigation or proceedings. We have insurance
coverage against operating hazards, including product liability
claims and personal injury claims related to our products or
operating environments in which our employees operate, to the
extent deemed prudent by our management and to the extent insurance
is available. However, our insurance policies are subject to
exclusions, limitations, and other conditions and may not apply in
all cases, for example where willful wrongdoing on our part is
alleged. Additionally, the nature and amount of that insurance may
not be sufficient to fully indemnify us against liabilities arising
out of pending and future claims and litigation. Additionally, in
individual circumstances, certain proceedings or cases may also
lead to our formal or informal exclusion from tenders or the
revocation or loss of business licenses or permits. Our financial
condition, results of operations, or cash flows could be adversely
affected by unexpected claims not covered by insurance.
In addition, the tools, techniques, methodologies, programs, and
components we use to provide our services may infringe upon the
intellectual property rights of others. Infringement claims
generally result in significant legal and other costs. The
resolution of these claims could require us to enter into license
agreements or develop alternative technologies. The development of
these technologies or the payment of royalties under licenses from
third parties, if available, would increase our costs. If a license
were not available, or we are not able to develop alternative
technologies, we might not be able to continue providing a
particular service or product, which could adversely affect our
financial condition, results of operations, or cash flows.
Currency exchange rate fluctuations could adversely affect
our financial condition, results of operations, or cash
flows.
We conduct operations around the world in many different
currencies. Because a significant portion of our revenue is
denominated in currencies other than our reporting currency, the
U.S. dollar, changes in exchange rates will produce fluctuations in
our revenue, costs, and earnings, and may also affect the book
value of our assets and liabilities and related equity. Although we
do not hedge translation impacts on earnings, we do hedge
transaction impacts on margins and earnings where the transaction
is not in the functional currency of the business unit. Our
efforts to minimize our currency exposure through such hedging
transactions may not be successful depending on market and business
conditions. Moreover, certain currencies in which the Company
trades, specifically currencies in countries such as Angola and
Nigeria, do not actively trade in the global foreign exchange
markets and may subject us to increased foreign currency exposures.
As a result, fluctuations in foreign currency exchange rates may
adversely affect our financial condition, results of operations, or
cash flows.
We may incur significant Merger-related costs.
We have incurred and expect to incur additional non-recurring
direct and indirect costs associated with the Merger. In addition
to the costs and expenses associated with the consummation of the
Merger, we are also integrating processes, policies, procedures,
operations, technologies, and systems. While we have assumed that a
certain level of expenses would be incurred relating to the Merger
and continue to assess the magnitude of these costs, there are many
factors beyond our control that could affect the total amount or
the timing of the integration and implementation expenses. These
costs and expenses could reduce the realization of efficiencies and
strategic benefits we expect to achieve from the Merger, and the
expected net benefit of the Merger may not be achieved in the near
term or at all.
Our acquisition and divestiture activities involve
substantial risks.
We have made and expect to continue to pursue acquisitions,
dispositions, or other investments that may strategically fit our
business and/or growth objectives. We cannot provide assurances
that we will be able to locate suitable acquisitions, dispositions,
or investments, or that we will be able to consummate any such
transactions on terms and conditions acceptable to us. Even if we
do successfully execute such transactions, they may not result in
anticipated benefits, which could have a material adverse effect on
our financial results. If we are unable to successfully integrate
and develop acquired businesses, we could fail to achieve
anticipated synergies and cost savings, including any expected
increases in revenues and operating results. We may not be able to
successfully cause a buyer of a divested business to assume the
liabilities of that business or, even if such liabilities are
assumed, we may have difficulties enforcing our rights, contractual
or otherwise, against the buyer. We may invest in companies or
businesses that fail, causing a loss of all or part of our
investment. In addition, if we determine that an
other-than-temporary decline in the fair value exists for a company
in which we have invested, we may have to write down that
investment to its fair value and recognize the related write-down
as an investment loss.
A failure of our IT infrastructure, including as a result of
cyber attacks, could adversely impact our business and results of
operations.
The efficient operation of our business is dependent on our IT
systems. Accordingly, we rely upon the capacity, reliability, and
security of our IT hardware and software infrastructure and our
ability to expand and update this infrastructure in response to
changing needs. We have been subject to cyber attacks in the past,
including phishing, malware, and ransomware, and although no such
attack has had a material adverse effect on our business, this may
not be the case with future attacks. Our systems may be vulnerable
to damages from such attacks, as well as from natural disasters,
failures in hardware or software, power fluctuations, unauthorized
access to data and systems, loss or destruction of data (including
confidential customer information), human error, and other similar
disruptions, and we cannot give assurance that any security
measures we have implemented or may in the future implement will be
sufficient to identify and prevent or mitigate such
disruptions.
We rely on third parties to support the operation of our IT
hardware, software infrastructure, and cloud services, and in
certain instances, utilize web-based and software-as-a-service
applications. The security and privacy measures implemented by such
third parties, as well as the measures implemented by any entities
we acquire or with whom we do business, may not be sufficient to
identify or prevent cyber attacks, and any such attacks may have a
material adverse effect on our business. While our IT vendor
agreements typically contain provisions that seek to eliminate or
limit our exposure to liability for damages from a cyber-attack, we
cannot ensure such provisions will withstand legal challenges or
cover all or any such damages.
Threats to our IT systems arise from numerous sources, not all
of which are within our control, including fraud or malice on the
part of third parties, accidental technological failure, electrical
or telecommunication outages, failures of computer servers or other
damage to our property or assets, outbreaks of hostilities, or
terrorist acts. The failure of our IT systems or those of our
vendors to perform as anticipated for any reason or any significant
breach of security could disrupt our business and result in
numerous adverse consequences, including reduced effectiveness and
efficiency of operations, inappropriate disclosure of confidential
and proprietary information, reputational harm, increased overhead
costs, and loss of important information, which could have a
material adverse effect on our business and results of operations.
In addition, we may be required to incur significant costs to
protect against damage caused by these disruptions or security
breaches in the future. Our insurance coverage may not cover all of
the costs and liabilities we incur as the result of any disruptions
or security breaches, and if our business continuity and/or
disaster recovery plans do not effectively and timely resolve
issues resulting from a cyber-attack, we may suffer material
adverse effects on our business.
We are subject to governmental regulation and other legal
obligations related to privacy, data protection, and data security.
Our actual or perceived failure to comply with such obligations
could harm our business.
We are subject to international data protection laws, such as
the General Data Protection Regulation, or GDPR, in the European
Economic Area. The GDPR imposes several stringent requirements for
controllers and processors of personal data which have increased
our obligations, including, for example, by requiring more robust
disclosures to individuals, notifications, in some cases, of data
breaches to regulators and data subjects, and a record of
processing and other policies and procedures to be maintained to
adhere to the accountability principle. In addition, we are subject
to the GDPR’s rules on transferring personal data outside of the
EEA (including to the United States), and some of these rules are
currently being challenged in the courts. Failure to comply with
the requirements of GDPR and the local laws implementing or
supplementing the GDPR could result in fines of up to €20,000,000
or up to 4% of the total worldwide annual turnover of the preceding
financial year, whichever is higher, as well as other
administrative penalties. We are likely to be required to expend
significant capital and other resources to ensure ongoing
compliance with the GDPR and other applicable data protection
legislation, and we may be required to put in place additional
control mechanisms which could be onerous and adversely affect our
business, financial condition, results of operations, and
prospects.
We may not realize the cost savings, synergies, and other
benefits expected from the Merger.
The combination of two independent companies is a complex,
costly, and time-consuming process. As a result, we will be
required to continue to devote management attention and resources
to integrating the business practices and operations of Technip and
FMC Technologies. The integration process may disrupt our
businesses and, if ineffectively implemented, could preclude
realization of the full benefits expected from the Merger. Our
failure to meet the challenges involved in successfully integrating
the operations of Technip and FMC Technologies or otherwise realize
the anticipated benefits of the Merger could interrupt, and
seriously harm the results of, our operations. In addition, the
overall integration of Technip and FMC Technologies may result in
unanticipated expenses, liabilities, competitive responses, loss of
client relationships, diversion of management’s attention, or other
problems, and such problems could, if material, cause our stock
price to decline. The difficulties of combining the operations of
Technip and FMC Technologies include, but are not limited to, the
following:
- managing a significantly larger
company;
- coordinating geographically separate
organizations;
- the potential diversion of management
focus and resources from other strategic opportunities and from
operational matters;
- aligning and executing our
strategy;
- retaining existing customers and
attracting new customers;
- maintaining employee morale and
retaining key management and other employees;
- integrating two unique business
cultures,
- the possibility of faulty assumptions
underlying expectations regarding the integration process;
- consolidating corporate and
administrative infrastructures and eliminating duplicative
operations;
- coordinating distribution and marketing
efforts;
- integrating IT, communications, and
other systems;
- changes in applicable laws and
regulations;
- managing tax costs or inefficiencies
associated with integrating our operations;
- unforeseen expenses or delays
associated with the Merger; and
- taking actions that may be required in
connection with obtaining regulatory approvals.
Many of these factors are at least partially outside our control
and any one of them could result in increased costs, decreased
revenue, and diversion of management’s time and energy, which could
materially impact our business, financial condition, and results of
operations. In addition, even if the operations of Technip and FMC
Technologies are successfully integrated, we may not realize the
full benefits of the Merger, including the synergies, cost savings,
sales, or growth opportunities that we expect. These benefits may
not be achieved within the anticipated time frame, or at all. As a
result, the combination of Technip and FMC Technologies may not
result in the realization of the full benefits expected from the
Merger.
The IRS may not agree that we should be treated as a foreign
corporation for U.S. federal tax purposes and may seek to impose an
excise tax on gains recognized by certain individuals.
Although we are incorporated in the United Kingdom, the U.S.
Internal Revenue Service (the “IRS”) may assert that we should be
treated as a U.S. “domestic” corporation (and, therefore, a U.S.
tax resident) for U.S. federal income tax purposes pursuant to
Section 7874 of the U.S. Internal Revenue Code of 1986, as amended
(the “Code”). For U.S. federal income tax purposes, a corporation
(i) is generally considered a “domestic” corporation (or U.S. tax
resident) if it is organized in the United States or of any state
or political subdivision therein, and (ii) is generally considered
a “foreign” corporation (or non-U.S. tax resident) if it is not
considered a domestic corporation. Because we are a U.K.
incorporated entity, we would be considered a foreign corporation
(and, therefore, a non-U.S. tax resident) under these rules.
Section 7874 of the Code (“Section 7874”) provides an exception
under which a foreign incorporated entity may, in certain
circumstances, be treated as a domestic corporation for U.S.
federal income tax purposes.
We do not believe this exception applies. However, the Section
7874 rules are complex and subject to detailed regulations, the
application of which is uncertain in various respects. It is
possible that the IRS will not agree with our position. Should the
IRS successfully challenge our position, it is also possible that
an excise tax under Section 4985 of the Code (the “Section 4985
Excise Tax”) may be assessed against certain “disqualified
individuals” (including former officers and directors of FMC
Technologies, Inc.) on certain stock-based compensation held
thereby. We may, if we determine that it is appropriate, provide
disqualified individuals with a payment with respect to the Section
4985 Excise Tax, so that, on a net after-tax basis, they would be
in the same position as if no such Section 4985 Excise Tax had been
applied.
In addition, there can be no assurance that there will not be a
change in law or interpretation, including with retroactive effect,
that might cause us to be treated as a domestic corporation for
U.S. federal income tax purposes.
U.S. tax laws and/or guidance could affect our ability to
engage in certain acquisition strategies and certain internal
restructurings.
Even if we are treated as a foreign corporation for U.S. federal
income tax purposes, Section 7874, U.S. Treasury regulations, and
other guidance promulgated thereunder may adversely affect our
ability to engage in certain future acquisitions of U.S. businesses
or to restructure the non-U.S. members of our group. These
limitations, if applicable, may affect the tax efficiencies that
otherwise might be achieved in such potential future transactions
or restructurings.
In addition, the IRS and the U.S. Treasury have issued final and
temporary regulations providing that, even if we are treated as a
foreign corporation for U.S. federal income tax purposes, certain
intercompany debt instruments issued on or after April 4, 2016 will
be treated as equity for U.S. federal income tax purposes,
therefore limiting U.S. tax benefits and resulting in possible U.S.
withholding taxes. Although recent guidance from the U.S. Treasury
proposes deferring certain documentation requirements that would
otherwise be imposed with respect to covered debt instruments, and
further indicates that these rules generally are the subject of
continuing study and may be further materially modified, the
current regulations may adversely affect our future effective tax
rate and could also impact our ability to engage in future
restructurings if such transactions cause an existing intercompany
debt instrument to be treated as reissued for U.S. federal income
tax purposes.
We are subject to the tax laws of numerous jurisdictions;
challenges to the interpretation of, or future changes to, such
laws could adversely affect us.
We and our subsidiaries are subject to tax laws and regulations
in the United Kingdom, the United States, France, and numerous
other jurisdictions in which we and our subsidiaries operate. These
laws and regulations are inherently complex, and we are, and will
continue to be, obligated to make judgments and interpretations
about the application of these laws and regulations to our
operations and businesses. The interpretation and application of
these laws and regulations could be challenged by the relevant
governmental authorities, which could result in administrative or
judicial procedures, actions, or sanctions, which could be
material.
In addition, the U.S. Congress, the U.K. Government, the
European Union, the Organization for Economic Co-operation and
Development (the “OECD”), and other government agencies in
jurisdictions where we and our affiliates do business have had an
extended focus on issues related to the taxation of multinational
corporations. New tax initiatives, directives, and rules, such as
the U.S. Tax Cuts and Jobs Act, the OECD’s Base Erosion and Profit
Shifting initiative, and the European Union’s Anti-Tax Avoidance
Directives, may increase our tax burden and require additional
compliance-related expenditures. As a result, our financial
condition, results of operations, or cash flows may be adversely
affected. Further changes, including with retroactive effect, in
the tax laws of the United States, the United Kingdom, the European
Union, or other countries in which we and our affiliates do
business could also adversely affect us.
We may not qualify for benefits under tax treaties entered
into between the United Kingdom and other countries.
We operate in a manner such that we believe we are eligible for
benefits under tax treaties between the United Kingdom and other
countries. However, our ability to qualify for such benefits will
depend on whether we are treated as a U.K. tax resident, the
requirements contained in each treaty and applicable domestic laws,
on the facts and circumstances surrounding our operations and
management, and on the relevant interpretation of the tax
authorities and courts. For example, because of the anticipated
withdrawal of the United Kingdom from the European Union
(“Brexit”), we may lose some or all of the benefits of tax treaties
between the United States and the remaining members of the European
Union, and face higher tax liabilities, which may be significant.
Another example is the Multilateral Convention to Implement Tax
Treaty Related Measures to Prevent Base Erosion and Profit Shifting
(the “MLI”), which entered into force for participating
jurisdictions on July 1, 2018. The MLI recommends that countries
adopt a “limitation-on-benefit” rule and/or a “principle purposes
test” rule with regards to their tax treaties. The scope and
interpretation of these rules as adopted pursuant to the MLI are
presently under development, but the application of either rule
might deny us tax treaty benefits that were previously
available.
The failure by us or our subsidiaries to qualify for benefits
under tax treaties entered into between the United Kingdom and
other countries could result in adverse tax consequences to us
(including an increased tax burden and increased filing
obligations) and could result in certain tax consequences of owning
and disposing of our shares.
We intend to be treated exclusively as a resident of the
United Kingdom for tax purposes, but French or other tax
authorities may seek to treat us as a tax resident of another
jurisdiction.
We are incorporated in the United Kingdom. English law currently
provides that we will be regarded as a U.K. resident for tax
purposes from incorporation and shall remain so unless (i) we are
concurrently a resident in another jurisdiction (applying the tax
residence rules of that jurisdiction) that has a double tax treaty
with the United Kingdom and (ii) there is a tiebreaker provision in
that tax treaty which allocates exclusive residence to that other
jurisdiction.
In this regard, we have a permanent establishment in France to
satisfy certain French tax requirements imposed by the French Tax
Code with respect to the Merger. Although it is intended that we
will be treated as having our exclusive place of tax residence in
the United Kingdom, the French tax authorities may claim that we
are a tax resident of France if we were to fail to maintain our
“place of effective management” in the United Kingdom. Any such
claim would be settled between the French and U.K. tax authorities
pursuant to the mutual assistance procedure provided for by the tax
treaty concluded between France and the United Kingdom. There is no
assurance that these authorities would reach an agreement that we
will remain exclusively a U.K. tax resident; a determination which
could materially and adversely affect our business, financial
condition, results of operations, and future prospects. A failure
to maintain exclusive tax residency in the United Kingdom could
result in adverse tax consequences to us and our subsidiaries and
could result in certain adverse changes in the tax consequences of
owning and disposing of our shares.
The Company has identified material weaknesses relating to
internal control over financial reporting. If our remedial measures
are insufficient to address the material weaknesses, or if one or
more additional material weaknesses or significant deficiencies in
our internal control over financial reporting are discovered or
occur in the future, our consolidated financial statements may
contain material misstatements and we could be required to further
restate our financial results, which could have a material adverse
effect on our financial condition, results of operations, and cash
flows.
Management identified material weaknesses in the Company’s
internal control over financial reporting as of December 31, 2017
and December 31, 2018 as described in the Corporate Governance
Report of this U.K. Annual Report.
A material weakness is a deficiency, or combination of
deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement
of the company’s annual or interim financial statements will not be
prevented or detected on a timely basis.
As a result of the material weaknesses, management has concluded
that our internal control over financial reporting was not
effective as of December 31, 2018. In addition, as a result of
these material weaknesses, our chief executive officer and chief
financial officer have concluded that, as of December 31, 2018, our
disclosure controls and procedures were not effective. Until these
material weaknesses are remediated, they could lead to errors in
our financial results and could have a material adverse effect on
our financial condition, results of operations, and cash flows.
If our remedial measures are insufficient to address the
material weaknesses, or if one or more additional material
weaknesses or significant deficiencies in our disclosure controls
and procedures or internal control over financial reporting are
discovered or occur in the future, our consolidated financial
statements may contain material misstatements and we could be
required to restate our financial results, which could have a
material adverse effect on our financial condition, results of
operations, and cash flows, restrict our ability to access the
capital markets, require significant resources to correct the
weaknesses or deficiencies, subject us to fines, penalties or
judgments, harm our reputation or otherwise cause a decline in
investor confidence and in the market price of our stock.
Additional material weaknesses or significant deficiencies in
our internal control over financial reporting could be identified
in the future. Any failure to maintain or implement
required new or improved controls, or any difficulties we
encounter in their implementation, could result in additional
significant deficiencies or material weaknesses, cause us to fail
to meet our periodic reporting obligations or result in material
misstatements in our financial statements. Any such failure could
also adversely affect the results of periodic management
evaluations and annual auditor attestation reports regarding the
effectiveness of our internal control over financial reporting
required under Section 404 of the U.S. Sarbanes-Oxley Act of 2002
and the rules promulgated under Section 404. The existence of a
material weakness could result in errors in our financial
statements that could result in a restatement of financial
statements, cause us to fail to meet our reporting obligations and
cause investors to lose confidence in our reported financial
information, leading to, among other things, a decline in our stock
price.
We can give no assurances that the measures we have taken to
date, or any future measures we may take, will fully remediate the
material weaknesses identified or that any additional material
weaknesses will not arise in the future due to our failure to
implement and maintain adequate internal control over financial
reporting. In addition, even if we are successful in strengthening
our controls and procedures, those controls and procedures may not
be adequate to prevent or identify irregularities or ensure the
fair and accurate presentation of our financial statements included
in our periodic reports filed with the U.S. Securities and Exchange
Commission.
Appendix C – Related party transactions
Receivables, payables, revenues and expenses which are included
in our 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.
Trade receivables consisted of receivables due from following
related parties:
December 31, (In millions) 2018
2017 TP JGC Coral France SNC $ 31.6 $ 42.5 Technip Odebrecht
PLSV CV 10.9 13.8 Anadarko Petroleum Company 4.9 22.3 Others 14.3
19.8
Total trade receivables $ 61.7 $ 98.4
TP JGC Coral France SNC and Technip Odebrecht PLSV CV are equity
method affiliates. A member of our Board of Directors serves on the
Board of Directors of Anadarko Petroleum Company.
Trade payables consisted of payables due to following related
parties:
December 31, (In millions) 2018
2017 Dofcon Navegacao $ 2.5 $ 12.3 Chiyoda 70.0 48.3 JGC
Corporation 69.5 52.4 IFP Energies nouvelles 2.4 — Anadarko
Petroleum Company 0.7 — Magma Global Limited 0.6 — Others 2.9
8.8
Total trade payables $ 148.6 $ 121.8
Dofcon Navegacao and Magma Global Limited are equity affiliates.
JGC Corporation and Chiyoda are joint venture partners on our Yamal
project. A member of our Board of Directors is an executive officer
of IFP Energies nouvelles.
Additionally, we have note receivable balance of $130.0 million
and $140.9 million as of December 31, 2018 and 2017, respectively.
The note receivables balance includes $119.9 million and $114.9
million with Dofcon Brasil AS at December 31, 2018 and 2017,
respectively. Dofcon Brasil AS is accounted for as an equity method
affiliate. These are included in other noncurrent assets on our
consolidated balance sheets.
Revenue consisted of amount from following related parties:
(In millions) 2018 2017 Anadarko
Petroleum Company $ 124.8 $ 111.3 TP JGC Coral France SNC $ 118.2 $
69.9 Others $ 50.3 $ 56.9
Total revenue $ 293.3
$ 238.1
Expenses consisted of amount to following related parties:
(In millions) 2018 2017 Chiyoda
$ 53.0 $ 44.1 JGC Corporation 81.2 46.8 IFP Energy nouvelles 4.4 —
Creowave OY 1.9 4.7 Arkema S.A. 2.6 — Magma Global Limited 3.0 —
Others 8.6 45.8
Total expenses $ 154.7 $ 141.4
LOAN RECEIVABLES – RELATED PARTIES
December 31, (In millions) 2018
2017 Loan receivables – related parties $ 1,585.9 $
2,425.0
In 2018, TechnipFMC Holdings Ltd repaid its loan for $700.0
million and Technip UK Ltd (“Technip UK”) and Technip Umbilicals
repaid part of their intercompany loans for $51.6 million.
The Company’s loan receivables from related parties are
unsecured and are stated net of impairment allowance of $4.7
million at December 31, 2018. As a result of applying IFRS 9, the
Company did not restate the prior period.
Loan receivables from related parties primarily consist of loans
to Technip Offshore International SAS (“TOI”), Technip UK and
Asiaflex Products Sdn Bhd (“Asiaflex”). The terms and interest
rates for significant loans are detailed below.
(i) Loans to TOI consist of two loans in the amount of $1,126.8
million and $118.3 million respectively with 5 year terms and
interest rates of 4.16% and 2.10% respectively.
(ii) Loan to Technip UK is in the amount of $143.0 million with
a 5 year term and interest rate of 2.05%.
(iii) Loan to Asiaflex is in the amount of $74.3 million with a
10 year term and interest rate of LIBOR 3M +1.1%.
LOAN PAYABLES – RELATED PARTIES
Loan payables – related parties consists of the following:
December 31, (In millions) 2018
2017 Loan payables - related parties $ 5,417.3 $
2,800.0
Loan payables to related parties are unsecured and consist of
borrowings from TechnipFMC Holdings Ltd (“Holdings Ltd”),
TechnipFMC US Holdings Inc (“US Holdings”), TechnipFMC
International Ltd (“International Ltd”), TechnipFMC Finance ULC
(“Finance ULC”), and TechnipFMC (Europe) Ltd (“Europe Ltd”). The
terms and interest rates for significant loans are detailed
below.
(i) Loans from Holdings Ltd primarily consist of two loans in
the amount of $838.5 million and $545.8 million respectively with 5
year terms and interest rates of 4.68% and 2.69% respectively.
(ii) Loan from US Holdings is in the amount of $1,008.1 million
with a 5 year term and interest rate of 4.83%.
(iii) Loan from International Ltd is in the amount of $2,076.1
million with a 5 year term and interest rate of 2.69%.
(iv) Loans from Finance ULC primarily consist of a loan in the
amount of $389.4 million with a 5 year term and interest rate of
2.69%.
(v) Loan from Europe Ltd is in the amount of $350.0 million with
a 5 year term and interest rate of 2.69%.
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Investor relationsMatt SeinsheimerVice President Investor
RelationsTel: +1 281 260 3665Email: Matt Seinsheimer
Phillip LindsayDirector Investor Relations EuropeTel: +44 203
429 3929Email: Phillip Lindsay
Media relationsChristophe BelorgeotVice President
Corporate CommunicationsTel: +33 1 47 78 39 92Email: Christophe
Belorgeot
Delphine NayralManager Public RelationsTel: +33 1 47 78 34
83Email: Delphine Nayral