-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MMvcDkcQW2B11YjkTAeWYnk/cd0rUcLi8CTWGKYIAHoL2He/KFkwfyI5l3ZKA22T RuOvKdSqDks9HYxP7fil+Q== 0000899243-01-000694.txt : 20010327 0000899243-01-000694.hdr.sgml : 20010327 ACCESSION NUMBER: 0000899243-01-000694 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010326 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COOPER CAMERON CORP CENTRAL INDEX KEY: 0000941548 STANDARD INDUSTRIAL CLASSIFICATION: OIL & GAS FILED MACHINERY & EQUIPMENT [3533] IRS NUMBER: 760451843 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-13884 FILM NUMBER: 1579257 BUSINESS ADDRESS: STREET 1: 515 POST OAK BLVD STREET 2: STE 1200 CITY: HOUSTON STATE: TX ZIP: 77027 BUSINESS PHONE: 7135133322 MAIL ADDRESS: STREET 1: 515 POST OAK BOULEVARD CITY: HOUSTON STATE: TX ZIP: 77027 10-K405 1 0001.txt FORM 10-K405 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal year ended December 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------------- Commission File Number 1-13884 COOPER CAMERON CORPORATION (Exact name of Registrant as specified in its charter) Delaware 76-0451843 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 515 Post Oak Boulevard Suite 1200 Houston, Texas (Address of principal 77027 executive offices) (Zip Code) Registrant's telephone number, including area code (713) 513-3300 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Name of Each Exchange on Title of Each Class Which Registered ------------------- -------------------------- Common Stock, Par Value $0.01 Per Share New York Stock Exchange Junior Participating Preferred Stock New York Stock Exchange Purchase Rights Par Value $0.01 Per Share Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in a definitive proxy or information statement incorporated by reference in Part III of this Form 10-K of any amendment to this Form 10-K. [X] The number of shares of Common Stock, par value $.01 per share, outstanding as of March 14, 2001 was 54,108,721 The aggregate market value of the Common Stock, par value $0.01 per share, held by non-affiliates of Registrant as of March 14, 2001 was approximately $3,260,316,853. For the purposes of the determination of the above statement amount only, all directors and executive officers of the Registrant are presumed to be affiliates. ---------------- DOCUMENTS INCORPORATED BY REFERENCE Portions of Registrant's Annual Report to Stockholders for 2000 are incorporated by reference into Part II. Portions of Registrant's 2001 Proxy Statement for the Annual Meeting of Stockholders to be held May 10, 2001 are incorporated by reference into Part III. ================================================================================ TABLE OF CONTENTS
PAGE ------------------------------------------- 2000 2000 MARCH 23, 2001 ITEM FORM 10-K ANNUAL REPORT PROXY STATEMENT - ------- --------- ------------- --------------- PART I ------ 1. Business.......................................................... 1 - - Markets and Products............................................ 2 - - Market Issues................................................... 7 - - New Product Development......................................... 7 - - Competition..................................................... 9 - - Manufacturing................................................... 10 - - Backlog......................................................... 10 - - Patents, Trademarks and Other Intellectual Property............. 10 - - Employees....................................................... 11 - - 2. Properties........................................................ 11 - - 3. Legal Proceedings................................................. 12 - - 4. Submission of Matters to a Vote of Security Holders............... 14 - - PART II ------- 5. Market for Registrant's Common Equity and Related Stockholder Matters............................................. 14 - - 6. Selected Financial Data........................................... 14 55 - 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................... 15 25-32 - 7A. Quantitative and Qualitative Disclosures about Market Risk........ 15 31-32 8. Financial Statements and Supplementary Data....................... 15 33-54 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure........................................ 15 - - Part III -------- 10. Directors and Executive Officers of the Registrant................ 16 - 7-8, 20 11. Executive Compensation............................................ 17 - 14-17 12. Security Ownership of Certain Beneficial Owners and Management...................................................... 17 - 9, 19 13. Certain Relationships and Related Transactions.................... 18 - - Part IV ------- 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................................................ 18 - -
PART I ------ ITEM 1. BUSINESS. Cooper Cameron Corporation ("Cooper Cameron" or the "Company") is a leading international manufacturer and provider of pressure control systems, equipment and services, including valves, wellheads, controls, chokes, blowout preventers and assembled systems for oil and gas drilling and production used in onshore, offshore and subsea applications. Cooper Cameron is also a leading manufacturer of integral engine-compressors, reciprocating compressors, turbochargers and centrifugal air compressors. Cooper Cameron's business of manufacturing petroleum production equipment and compression and power equipment began in the mid-1800's with the manufacture of steam engines that provided power for plants and textile or rolling mills. By 1900, with the discovery of oil and gas, Cooper Cameron moved into the production of natural gas internal combustion engines and gas compressors. The Company added to its product offering through various acquisitions, in particular the acquisitions of The Bessemer Gas Engine Company (gas engines and compressors); Pennsylvania Pump and Compressor (reciprocating air and gas compressors); Ajax Iron Works (compressors); Superior (engines and compressors); Joy Petroleum Equipment Group (valves, couplings and wellheads); Joy Industrial Compressor Group (compressors); and Cameron Iron Works (blowout preventers, ball valves, control equipment and McEvoy-Willis wellhead equipment and choke valves). Cooper Cameron, a Delaware corporation, was incorporated on November 10, 1994. The Company operated as a wholly-owned subsidiary of Cooper Industries, Inc. ("Cooper") until June 30, 1995, the effective date of the completion of an exchange offer with Cooper's stockholders resulting in the Company becoming a separate stand-alone company. The common stock of Cooper Cameron is trading on the New York Stock Exchange under the symbol "CAM". In 1996, Cooper Cameron purchased the assets and assumed certain operating liabilities of Ingram Cactus Company for approximately $100.5 million in cash. The business acquired manufactures and sells wellheads, surface systems, valves and actuators used primarily in onshore oil and gas production operations, and owned manufacturing facilities in Oklahoma City, Oklahoma and Broussard, Louisiana, as well as in the United Kingdom and Austria. The Company completed the closure of the Austria facility in 2000. The Company also acquired interests in the Ingram Cactus joint ventures in Venezuela and Malaysia. The operations have now been integrated into those of the Cameron division. In 1998, the Company acquired Orbit Valve International, Inc. ("Orbit(R)") for approximately $104 million in cash and debt. Orbit became part of the Cooper Cameron Valves organization. Orbit manufactures and sells high- performance valves and actuators for the oil and gas and petrochemical industries. Orbit's primary manufacturing facility is located in Little Rock, Arkansas with a sales, marketing, assembly, test and warehousing base at Livingston, Scotland in the United Kingdom. 1 During 1999, the Company sold its rotating compressor product line business to Rolls-Royce plc for approximately $200 million. The operations that were sold had primary facilities in Liverpool, United Kingdom, Hengelo in the Netherlands and Mt. Vernon, Ohio. The Company decided to divest this product line because it did not control the key technology of the business (the engine which Rolls-Royce provides) and had limited aftermarket opportunities. During the period from June 30, 1995 through December 31, 2000, the Company also made various other small product line acquisitions and dispositions in certain of its business segments. In January 2001, the Company announced its intention to exit the market for new Superior brand natural gas engines and, as a result, to close its Springfield, Ohio manufacturing facility. The shutdown is expected to largely be completed during the first half of 2001. BUSINESS SEGMENTS ----------------- MARKETS AND PRODUCTS The Company's operations are organized into four separate business segments which are Cameron, Cooper Cameron Valves, Cooper Energy Services and Cooper Turbocompressor, each of which is also a division. For additional industry segment information for each of the three years in the period ended December 31, 2000, see Note 13 of the Notes to Consolidated Financial Statements, which Notes are incorporated herein by reference in Part II, Item 8 hereof ("Notes to Consolidated Financial Statements.") Cameron Division Cameron manufactures pressure control systems and equipment and provides services for oil and gas drilling and production in onshore, offshore and deepwater subsea applications. The primary products include surface and subsea production systems, gate valves, actuators, chokes, drilling and production risers and aftermarket parts and services, wellheads, drilling valves, blowout preventers ("BOPs") and drilling and production control systems. These products are marketed under the brand names Cameron(R), W-K-M(R), McEvoy(R), Willis(R), and Ingram Cactus(R). The equipment is manufactured in a variety of sizes and to various specifications with working pressure ratings up to 30,000 pounds per square inch ("p.s.i."). The wellhead equipment is designed to support the casing and production tubulars and includes casing head housings, casing heads and tubing heads. Valves of different sizes and design are assembled with other components into an assembly known as a "christmas tree," which is mounted on the wellhead equipment and is used to control the flow of oil and gas from a producing well. Most christmas trees are custom designed to meet individual customer requirements. Cameron also manufactures subsea production systems, which consist of equipment used to complete an oil or gas well on the sea floor. Subsea systems tend to be sophisticated and generally require a high degree of technological innovation. 2 In 1993, Cameron introduced its patented SpoolTree(TM) horizontal subsea production system for use in oil and gas fields with subsea completions that require frequent retrieval of downhole equipment. With the SpoolTree system, well completion and workover activities can be performed without a workover riser or removal of the christmas tree and under conventional blowout preventer control, thereby reducing the time and equipment needed to perform such activities. Cameron provides surface and subsea blowout preventer (BOP) stacks, drilling riser, drilling valves and choke and kill manifolds, as well as hydraulic and multiplexed electro-hydraulic (MUX) control systems used to operate surface and subsea BOP stacks, to multiple customers in the drilling business worldwide. Additionally, Cameron provides complete integrated elastomer research, development and manufacturing. These products are used in pressure and flow control equipment. This technology also supports the petroleum, petrochemical, rubber molding and plastics industries in the development and testing of elastomer and plastic products. The Cameron Willis Chokes business unit was formed in late 1997 to focus resources on the choke product line with the goal of enhancing Cameron's performance in this product line. Cameron Willis manufactures production chokes, control valves, drilling choke systems, actuators, and pigging and production automation systems for the surface and subsea production markets. The Company's primary choke manufacturing operations have now been consolidated into its Longford, Ireland facility with surface gate valve actuator manufacturing primarily performed in Houston, Texas. The Cameron Controls business unit was created in late 1996 with a primary goal of expanding Cameron's role in the design, manufacture and service of drilling, production and workover control systems worldwide. Drilling and production equipment used on the ocean floor operates from a platform or other remote location through hydraulic or electronic connections that allow the operator to measure and control the pressures and throughput associated with these installations. Cameron Controls' two primary manufacturing assembly and testing facilities are located in Celle, Germany and Houston, Texas. In 2001, the Company intends to expand the CAMTROL system to include all of Cameron's controls capabilities, including production, drilling and workover. Continued product development in subsea production controls, bolstered by the successful installation of various projects, should strengthen and expand the Company's market position and product offerings. The Cameron division has established an aftermarket initiative, CAMSERV(TM), with a worldwide aftermarket organization that provides replacement parts, field service, major repairs and overhauls, unit installation assistance and Total Vendor Management contracts. The CAMSERV initiatives are designed to provide flexible, cost-effective solutions to customer aftermarket needs throughout the world and combine traditional aftermarket services and products. Cameron also provides an inventory of repair parts, service personnel, planning services and inventory and storage of customers' idle equipment. This initiative has reinforced Cameron's role as one of the industry's leaders in parts and service. 3 Cameron primarily markets its petroleum production equipment products directly to end-users through a worldwide network of sales and marketing employees, supported by agents in some international locations. Due to the technical nature of many of the products, the marketing effort is further supported by a staff of engineering employees. The balance of Cameron's products are sold through established independent distributors. Cameron's primary customers include major oil and gas exploration and production companies, independent oil and gas exploration and production companies, engineering and construction companies, drilling contractors, rental equipment companies and geothermal energy producers. Cooper Cameron Valves Division Cooper Cameron Valves ("CCV") provides products and services to the gas and liquids pipelines, oil and gas production and industrial process markets. CCV manufactures valves ranging in sizes from 1/4 inch to 60 inches in diameter and related systems primarily used to control pressures and direct oil and gas as they are moved from individual wellheads to industrial centers for processing. Large diameter valves are used primarily in natural gas transmission lines. Smaller valves are used in oil and gas gathering and processing systems and in various types of industrial processes in refineries and petrochemical plants. Gate valves, ball valves, butterfly valves, Orbit valves, rotary process valves, block and bleed valves, plug valves, actuators, chokes and aftermarket parts are marketed under the brand names Cameron(R), W-K-M(R), Orbit(R), Demco(R), Foster(R) and Thornhill Craver(TM). CCV markets its equipment and services through a worldwide network of combined sales and marketing employees, distributors and agents in selected international locations. Due to the technical nature of many of the products, the marketing effort is further supported by a staff of engineering employees. CCV's primary customers include major and independent oil and gas exploration and production companies, foreign national oil and gas companies, pipeline companies, refining companies and a wide range of industrial, petrochemical and processing industry companies. Distributors and customers currently have ready access to product information, including detailed technical drawings, engineering bulletins, manuals and catalogs via the CCV website. In 2001, CCV plans to launch a web- enabled valve configurator and quotes management system for internal use and eventually for certain CCV customers. In 2000, development was completed for a range of 2" to 16" ball valves capable of performing at pressures of 10,000 psi and in water depths of 10,000 feet. CCV significantly expanded its aftermarket business throughout the year, including the acquisition of Valve Sales Inc., a Houston-based valve repair and manufacturing company in the first quarter of 2000. 4 Cooper Energy Services Division Cooper Energy Services ("CES") provides products and services to the oil and gas production, gas transmission and process markets. The primary products include integral engine-compressors, reciprocating compressors, turbochargers, control systems and aftermarket parts and services. CES markets its products worldwide under the brand names Ajax(R), Cooper-Bessemer(R), Superior(R), Enterprise(R), C-B Turbocharger(R), PPC(R), Service Solutions(TM) and TXC(R). CES's reciprocating compressor products include "integral" and "separable" configurations. CES provides the Ajax integral engine-compressors (140 to 880 horsepower), which combine the engine and compressor on a single drive shaft and are used for gas re-injection and storage, as well as smaller gathering and transmission lines. In addition, a line of rotary screw compressors powered by natural gas engines and electric motor drives was added in 1997. CES introduced a proprietary 1,150 psi high-pressure rotary screw system in 1999. The Superior reciprocating compressors (400 to 9,000 horsepower) are used primarily for natural gas applications, including production, storage, withdrawal, processing and transmission, as well as petrochemical processing. The new Superior WG compressor series was introduced in 2000 for large project applications up to 9,000 horsepower. These high speed separable compressor units can be matched with either natural gas engine drivers or electric motors and provide a cost advantage over competitive equipment in the same power range. There is an installed base of Cooper-Bessemer engines and compressors (up to 30,000 horsepower) for which CES provides replacement parts and service on a worldwide basis. CES is organized into three business units in order to better focus on the strategic growth, product development, and technical support unique to its product offerings and to better serve its customers' needs. The three business units consist of the Ajax and Superior Compressor, Aftermarket Parts, and Aftermarket Service business units. In 1999, CES began selling all of its current offering of new compression equipment domestically through a network of independent distributors rather than on a direct basis with the end user. These distributors are offered varying levels of pricing and support depending on their volume of purchases and whether the products purchased are for their own rental fleets or for resale. CES completed its network of distributors for domestic compression equipment in mid- 2000. CES continues to sell its compression equipment internationally directly to end-users through a network of sales and marketing employees supported by agents in some locations. In addition to the sale of the rotating business previously described, CES initiated a significant level of restructuring aimed at improving the productivity of its manufacturing processes. In 2000, CES completed the closing of the Grove City, Pennsylvania plant and foundry. Most of the activity previously conducted at that location has been outsourced to third 5 parties or relocated to other CES or Cooper Cameron facilities. Also in early 2000, the relocation of the central warehouse in Mt. Vernon, Ohio to Houston, Texas was begun. CES has constructed a new separable compressor plant and research and development center in Waller, Texas. Each manufacturing station in the new plant is designed for short cycle, just-in-time machining and assembly to reduce inventory requirements and product lead times. The plant is designed to manufacture the division's complete line of separable compressor units to serve the natural gas market. The relocation of the existing compressor plant in Mt. Vernon, Ohio to the new Waller facility will be completed in the first half of 2001. In addition, CES continued to outsource other manufacturing activity during 2000 which resulted in cost savings. In January 2001, CES announced its decision to exit the market for new Superior brand natural gas engines, including its 2400 engine line, and to close the Springfield, Ohio engine plant. This shutdown is expected to be substantially completed by the end of the second quarter of 2001. The primary customers for compression equipment include the major oil and gas companies, large independent oil and gas producers, gas transmission companies and equipment leasing companies. Cooper Turbocompressor Division Cooper Turbocompressor ("CTC") markets its products under the brand names of TurboAir(R), Quad 2000(R), and MSG(R). This division manufactures the integrally geared centrifugal air compressors of the Joy Industrial Compressor Group. The compressors are used by industrial plants as a source of power for the operation of tools, actuation of control devices and to power automatic and semi-automatic production equipment. In addition, CTC also manufactures integrally geared centrifugal compressors for process air and gas applications. In these cases, the compressor is an integral part of the process in industries such as air separation, chemical, pharmaceutical, fermentation, petrochemical, refining and synthetic fuel. The process and plant air centrifugal compressors manufactured by CTC deliver oil-free compressed gas to the customer, thus preventing oil contamination of the finished products. Industrial markets worldwide increasingly prefer oil-free air for quality, safety, operational and environmental reasons. CTC provides aftermarket service and repairs on all equipment it produces through a worldwide network of service centers and field service technicians utilizing an extensive inventory of parts, including Genuine Joy(R) parts. CTC expanded its service organization with added training and certification of its domestic and international distributors in the plant air market. CTC provides installation and maintenance service labor, parts and factory repairs and upgrades to its worldwide customers for plant air and process gas compressors. 6 CTC primarily sells its products through sales representatives and independent distributors supported by a staff of trained product specialists. Customers include petrochemical and refining companies, durable goods manufacturers, basic resource, utility, air separation and chemical process companies, with a specific focus on automotive, glass, textile, electronics, food, container, pharmaceutical and other companies that require oil-free compressed air. During 2000, CTC expanded its product range through the addition of new compressor frames (TA-6000, TAC-2000 and TA-11000) and the addition of trademark accessories such as Dry Pac(R) heat compression dryers and Turboblend(R) hydro- cracked turbomachinery lubricating oil. CTC is also continuing its efforts to focus on customer service. Also in 2000, CTC began an active aftermarket development effort leveraging off its significant base of installed equipment, redefined its Engineered Compressor product line and has continued to move forward with an MSG Renaissance program to update its MSG product line. CTC expects to launch its e-commerce program in 2001, with the aim of providing incremental growth opportunities by adding new communication ideas and methods to the existing marketing plan. Also in 2001, CTC plans to establish a packaging capability in Asia to better serve customers in the region. MARKET ISSUES Cooper Cameron, through its segments, is one of the market leaders in the global market for petroleum production equipment. Cooper Cameron believes that it is well positioned to serve these markets. Plant and service center facilities around the world in major oil producing regions provide a broad, global breadth of market coverage. The international market is expected to be a major source of growth for Cooper Cameron. The desire to expand the oil and gas transmission capacity in developed and developing countries, for both economic and political reasons, will be one of the primary factors affecting market demand. Additionally, establishment of industrial infrastructure in the developing countries will necessitate the growth of basic industries that require plant air and process compression equipment. Production and service facilities in North and South America, Europe and the Far East provide the Company with the ability to serve the global marketplace. In each of Cooper Cameron's business segments, a large population of installed engines, compression equipment, and gas and oil production equipment exists in both the U.S. and international market segments. The rugged, long- lived nature of the equipment that exists in the field provides a predictable repair parts and service business. The Company expects that as increasing quantities of new units are sold into the international markets, there will be a continuing growth in market demand for aftermarket parts and service. NEW PRODUCT DEVELOPMENT As petroleum exploration activities have increasingly been focused on subsea locations, the Cameron division has directed much of its new product development efforts toward this market. In subsea exploration, customers are particularly concerned about safety, environmental 7 protection and ease of installation and maintenance. Cameron's reputation for high quality and high dependability has given it a competitive advantage in the areas of safety and environmental protection. A patented subsea production system called the SpoolTree, which was introduced in 1993, offers substantial cost savings to the customer as it is based upon a novel concept that eliminates the need for a workover riser or removal of the christmas tree during workover. Cameron has pioneered this concept and has developed similar products for land and platform applications, which significantly reduce customer costs. Cameron has also introduced the MOSAIC(TM) (Modular Subsea And Integrated Completions) system. MOSAIC includes a suite of pre-engineered elements with standard interfaces that can be combined in a fashion to allow customers to configure a system to meet their specific needs. Cameron believes that it has chosen to standardize components at a level low enough to give customers the required customization while providing engineering and manufacturing efficiencies. Cameron has realigned its engineering and marketing resources to further develop and market the MOSAIC Subsea system and other stand-alone standardized subsea products, such as christmas trees and wellheads. Several new drilling products were introduced in 1998 and 1999. These new products included the 3.5 million-pound load capacity LoadKing(TM) riser system, which set the industry standard for drilling in 10,000-foot water depths; a new lightweight and lower-cost locking mechanism for subsea BOPs; and a new generation of variable-bore ram packers. Additionally, Cameron's Freestanding Drilling Riser, introduced in 1999, was a winner of the Petroleum Engineer International Special Meritorious Award for Engineering Innovation. In May 1998, Cameron opened a new Research Center in Houston, Texas. The 53,000 sq. ft. Research Center is one of the largest product development facilities in the oil service sector. The facility has 10 specially designed test bays to test and evaluate Cameron's products under realistic conditions. These include environmental test chambers to simulate extreme pressures and temperatures, high-strength fixtures for the application of multi-million pound tensile and bending loads, high pressure gas compressors and test enclosures, a hyperbaric chamber to simulate the external pressures of deep water environments, and two circulation loops for erosion and flow testing. This Research Center is instrumental in providing Cameron's customers with innovative and cost-effective products. In 1997, Cameron Controls launched a new electro-hydraulic drilling control system that was favorably received in the market. A new subsea production control system was developed and launched in 1998. These successful product launches have enhanced the subsea systems offerings for the company. In 1999, CES developed the Superior WG compressor series. These high-speed separable compressor units can be matched with either natural gas engine drivers or electric motors for upstream production, mid-stream processing and gas transmission markets. The speed, power and versatility of the WG series provide a cost advantage over competitive equipment in the same power range. CES' first sale of the new unit was for an electric motor-driven dual gas boosting application, and was installed in the third quarter of 2000. 8 In 2000, CCV completed the development of a range of 2" to 16" ball valves capable of performing at pressures of 10,000 psi and in water depths of 10,000 feet. CTC focused product development resources to further expand its high efficiency plant air compressor line and to provide custom compressors matched to the requirements of its industrial gas customers. The latter is being achieved by advances in aerodynamic and rotor dynamic analytical design capability. During 2000, CTC introduced the TA-6000, the TAC-2000 and the TA- 11000 to extend the CTC standard product range up to 2,500 horsepower. These new products position CTC as a viable supplier of turbo plant air compressors in a wide range of horsepowers. Other new products offered in 2000 include Turboblend (CTC brand lubrication oil), Quad 2000 Controller upgrades (CTC electronic control systems) with up-to-date communication capabilities and component packaging programs. COMPETITION Cooper Cameron competes in all areas of its operations with a number of other companies, some of which have financial and other resources comparable to or greater than those of Cooper Cameron. Cooper Cameron believes it has a leading position in the petroleum production equipment markets, particularly with respect to its high-pressure products. In these markets, Cooper Cameron competes principally with FMC Corporation, Varco International, Inc., Masterflo, Kvaerner Oil and Gas, Vetco Gray Inc. (a subsidiary of Asea Brown Boveri), Dril-Quip, Inc., Hydril Company, Dresser Valve, Circor, Balon Corporation and Neles-Jamesbury. The principal competitive factors in the petroleum production equipment markets are technology, quality, service and price. Cooper Cameron believes that several factors give it a strong competitive position in these markets. Most significant are Cooper Cameron's broad product offering, its worldwide presence and reputation, its service and repair capabilities, its expertise in high pressure technology and its experience in alliance and partnership arrangements with customers and other suppliers. Cooper Cameron believes it also has a leading position in the compression equipment markets. In these markets, Cooper Cameron competes principally with the Dresser Rand Division of Ingersoll-Rand Company, Ingersoll-Rand Air Solutions Group, Demag, GHH/Borsig, Elliott Company, division of Ebara, Ariel Corporation and Atlas-Copco AB. The principal competitive factors in the compression equipment markets are engineering and design capabilities, product performance, reliability and quality, service and price. Cooper Cameron has a highly competent engineering staff and skilled technical and service representatives, with service centers located throughout the world. In all of its markets, Cooper Cameron's products have strong brand recognition and Cooper Cameron has an established reputation for quality and service. Cooper Cameron has a base of previously-installed products, which provides a steady demand for aftermarket parts and 9 service. Cooper Cameron has modern manufacturing facilities and state-of-the-art testing capabilities. MANUFACTURING Cooper Cameron has manufacturing facilities worldwide that conduct a broad variety of processes, including machining, fabrication, assembly and testing using a variety of forged and cast alloyed steels and stainless steel as the primary raw materials. In recent years, Cooper Cameron has rationalized plants and products, closed various manufacturing facilities, moved product lines to achieve economies of scale, and upgraded the remaining facilities. Manufacturing processes have been improved and significant capital expenditures have been made. Cooper Cameron maintains advanced manufacturing, quality assurance and testing equipment geared to the specific products that it manufactures and uses extensive process automation in its manufacturing operations. The manufacturing facilities utilize computer aided numeric controlled tools and manufacturing techniques that concentrate the equipment necessary to produce similar products in one area of the plant in a configuration commonly known as a manufacturing cell. One operator in a manufacturing cell can monitor and operate several machines, as well as assemble and test products made by such machines, thereby improving operating efficiency and product quality while reducing the amount of work-in-process and finished product inventories. Cooper Cameron believes that its test capabilities are critical to its overall process. The Company has the capability to test most equipment at full load, measuring all operating parameters, efficiency and emissions. All process compressors for air separation and all plant air compressors are given a mechanical and aerodynamic test in a dedicated test center prior to shipment. All of Cooper Cameron's European manufacturing plants are ISO certified and API licensed. Most of the U.S. plants are ISO certified and certification is in process for the remainder. ISO is an internationally recognized verification system for quality management. BACKLOG Cooper Cameron's backlog was approximately $528 million at December 31, 2000, (approximately 95% of which is expected to be shipped during 2001) as compared to $513 million at December 1999 and $790 million at December 31, 1998. Backlog consists of customer orders for which a purchase order has been received, satisfactory credit or financing arrangements exist and delivery is scheduled. PATENTS, TRADEMARKS AND OTHER INTELLECTUAL PROPERTY Cooper Cameron believes that the success of its business depends more on the technical competence, creativity and marketing abilities of its employees than on any individual patent, trademark or copyright. Nevertheless, as part of its ongoing research, development and manufacturing activities, Cooper Cameron has a policy of seeking patents when appropriate on inventions concerning new products and product improvements. Cooper Cameron owns 252 10 unexpired United States patents and 638 unexpired foreign patents. During 2000, 31 new patent applications were filed. Although in the aggregate these patents and Cooper Cameron's trademarks are of considerable importance to the manufacturing and marketing of many of its products, Cooper Cameron does not consider any single patent or trademark or group of patents or trademarks to be material to its business as a whole, except the Cameron and Cooper-Bessemer trademarks. Other important trademarks used by Cooper Cameron include Ajax, C-B Turbocharger, Demco, Enterprise, Foster, Ingram Cactus, McEvoy, MSG, Orbit, PPC, Quad 2000, Superior, Texcentric, Thornhill Craver, TurboAir, Willis and W-K-M. Cooper Cameron has the right to use the trademark Joy on aftermarket parts until November 2027. Cooper Cameron has registered its trademarks in the countries where such registration is deemed material. Cooper Cameron also relies on trade secret protection for its confidential and proprietary information. Cooper Cameron routinely enters into confidentiality agreements with its employees and suppliers. There can be no assurance, however, that others will not independently obtain similar information or otherwise gain access to Cooper Cameron's trade secrets. EMPLOYEES As of December 31, 2000, Cooper Cameron had approximately 7,300 employees, of which approximately 1,085 were represented by labor unions. Cooper Cameron believes its current relations with employees are good. In July 2000, the Company reached a new agreement with the International Association of Machinists union (IAM) representing 154 hourly employees of Cooper Turbocompressor which runs through July 28, 2003. Labor contracts expiring in 2001 cover 116 employees at Cameron's facility in Mexico, 130 Cameron employees in Singapore and 40 Cameron Elastomer Technology facility employees in Texas. The Company does not currently anticipate any significant problems in renewing these agreements. In 2001, the Company successfully concluded negotiation of a closing/severance agreement with the IAM representing approximately 100 employees at the CES facility in Springfield, Ohio. The Agreement provides for the orderly shutdown of operations there. ITEM 2. PROPERTIES The Company operates manufacturing plants ranging in size from approximately 9,500 square feet to approximately 442,000 square feet of manufacturing space. The Company also owns and leases warehouses, distribution centers, aftermarket and storage facilities, and sales offices. The Company leases its corporate headquarters and its Cameron division headquarters office space in Houston, Texas. The Company has under construction a new 9-story office building in Houston, Texas, which will house the Cameron division headquarters. Occupancy is expected to occur in late 2001 upon expiration of the existing lease. The Company manufactures, markets and sells its products and provides services throughout the world, operating facilities in numerous countries. On December 31, 2000, the significant facilities used by Cooper Cameron throughout the world for manufacturing, 11 distribution, aftermarket services, machining, storage and warehousing contained an aggregate of approximately 6,926,450 square feet of space, of which approximately 6,058,534 square feet (87%) was owned and 867,916 (13%) was leased. Of this total, approximately 4,835,938 square feet (70%) are located in the United States and 1,289,352 square feet (19%) are located in Europe. The table below lists the significant manufacturing, warehouse and distribution and aftermarket facilities by industry segment and geographic area. Cameron and Cooper Cameron Valves share space in certain facilities and, thus, are being reported together.
ASIA/PACIFIC WESTERN EASTERN AND HEMISPHERE HEMISPHERE MIDEAST TOTAL -------------- ------------- -------------- ---------- Cameron and Cooper Cameron Valves 30 10 4 44 Cooper Energy Services 19 0 0 19 Cooper Turbocompressor 3 3 0 6
Cooper Cameron believes its facilities are suitable for their present and intended purposes and are adequate for the Company's current and anticipated level of operations. ITEM 3. LEGAL PROCEEDINGS Cooper Cameron is a party to various legal proceedings and administrative actions, including certain environmental matters discussed below, all of which are of an ordinary or routine nature incidental to the operations of the Company. In the opinion of Cooper Cameron's management, such proceedings and actions should not, individually or in the aggregate, have a material adverse effect on the Company's results of operations or financial condition. Environmental Matters Cooper Cameron is subject to numerous federal, state, local and foreign laws and regulations relating to the storage, handling and discharge of materials into the environment, including the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"), the Clean Water Act, the Clean Air Act (including the 1990 Amendments) and the Resource Conservation and Recovery Act. Cooper Cameron believes that its existing environmental control procedures are adequate and it has no current plans for substantial capital expenditures in this area. Cooper Cameron has a proactive environmental management program aimed at compliance with existing environmental regulations and elimination or significant reduction in the generation of pollutants in its manufacturing processes. Cooper Cameron management intends to continue these policies and programs. 12 Cooper Cameron has been identified as a potentially responsible party ("PRP") with respect to five sites designated for cleanup under CERCLA or similar state laws, which impose liability for cleanup of certain waste sites and for related natural resource damages without regard to fault or the legality of waste generation or disposal. Persons liable for such costs and damages generally include the site owner or operator and persons that disposed or arranged for the disposal of substances found at those sites. Although CERCLA imposes joint and several liability on all PRPs, in application, the PRPs typically allocate the investigation and cleanup costs based upon the volume of waste contributed by each PRP. Settlements often can be achieved through negotiations with the appropriate environmental agency or the other PRPs. PRPs that contributed less than one percent of the waste are often given the opportunity to settle as a "de minimis" party, resolving liability for a particular site. Cooper Cameron is the major PRP at the Osborne Landfill in Grove City, Pennsylvania, which it owns. A remediation plan was developed and then accepted by the U.S. Environmental Protection Agency as the preferred remedy for the site. The construction phase of the remediation was completed in 1997 and the remaining costs relate to ground water treatment and monitoring. With respect to the remaining four sites, Cooper Cameron's share of the waste volume is estimated and believed to be less than one percent. Therefore, Cooper Cameron is a "de minimis" party with respect to these sites. Cooper Cameron has accruals to the extent costs are known for these five sites. Cooper Cameron believes, based on its review and other factors, that the estimated costs relating to these sites will not have a material adverse effect on its results of operations, financial condition or liquidity. However, no assurance can be given that the actual costs will not exceed the estimates of the cleanup costs once determined. Cooper Cameron does not currently anticipate any material adverse effect on its results of operations, financial condition or competitive position as a result of compliance with Federal, state, local or foreign environmental laws or regulations or cleanup costs of the sites discussed above. However, some risk of environmental liability and other costs is inherent in the nature of Cooper Cameron's business, and there can be no assurance that material environmental costs will not arise. Moreover, it is possible that future developments, such as promulgation of regulations implementing the 1990 amendments to the Clean Air Act and other increasingly strict requirements of environmental laws and enforcement policies thereunder, could lead to material costs of environmental compliance and cleanup by Cooper Cameron. The cost of environmental remediation and compliance generally has not been an item of material expense for Cooper Cameron during any of the periods presented, other than with respect to the Osborne Landfill described above. Cooper Cameron's balance sheet at December 31, 2000, includes accruals totaling approximately $1.0 million for environmental remediation activities. 13 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of 2000. PART II ------- ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The common stock of Cooper Cameron, par value $.01 per share (together with the associated Rights to Purchase Series A Junior Participating Preferred Stock), is traded on The New York Stock Exchange ("NYSE"). No dividends were paid during 2000. The following table indicates the range of trading prices on the NYSE from January 4, 1999 through December 31, 1999 and January 3, 2000 through December 29, 2000. Price Range ($) ------------------------- High Low Last ---- --- ---- 2000 First Quarter.... 71 7/8 42 3/8 66 7/8 Second Quarter... 83 9/16 60 9/16 66 Third Quarter.... 83 7/8 58 5/8 73 11/16 Fourth Quarter... 77 15/16 52 5/16 66 1/16 1999 First Quarter.... 35 7/8 22 1/4 33 7/8 Second Quarter... 41 5/16 27 3/4 37 1/16 Third Quarter.... 44 7/16 32 9/16 37 3/4 Fourth Quarter... 50 33 9/16 48 15/16 As of March 14, 2001, the approximate number of stockholders of record of Cooper Cameron common stock was 1,801. In addition, there were approximately 18,300 beneficial holders of the common stock, representing persons whose stock is in nominee or "street name" accounts through brokers. ITEM 6. SELECTED FINANCIAL DATA The information set forth under the caption "Selected Consolidated Historical Financial Data of Cooper Cameron Corporation" on page 55 in the 2000 Annual Report to Stockholders is incorporated herein by reference. 14 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information set forth under the caption "Management's Discussion and Analysis of Results of Operations and Financial Condition of Cooper Cameron Corporation" on pages 25-32 in the 2000 Annual Report to Stockholders is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The information for this item is set forth in the section entitled "Market Risk Information" on pages 31-32 in the 2000 Annual Report to Stockholders and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The following consolidated financial statements of the Company and the independent auditors' report set forth on pages 33-54 in the 2000 Annual Report to Stockholders are incorporated herein by reference: Report of Independent Auditors. Consolidated Results of Operations for each of the three years in the period ended December 31, 2000. Consolidated Balance Sheets as of December 31, 2000 and 1999. Consolidated Cash Flows for each of the three years in the period ended December 31, 2000. Consolidated Changes in Stockholders' Equity for each of the three years in the period ended December 31, 2000. Notes to Consolidated Financial Statements. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 15 PART III -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information on Directors of the Company is set forth in the section entitled "The Nominees and Continuing Directors" on pages 7-8 in the Proxy Statement of the Company for the Annual Meeting of Stockholders to be held on May 10, 2001, which section is incorporated herein by reference. Information regarding executive officers of the Company is set forth below. There are no family relationships among the officers listed, and there are no arrangements or understandings pursuant to which any of them were elected as officers. Officers are appointed or elected annually by the Board of Directors at its first meeting following the Annual Meeting of Stockholders, each to hold office until the corresponding meeting of the Board in the next year or until a successor shall have been elected, appointed or shall have qualified. Section 16(a) Beneficial Ownership Reporting Compliance The information concerning compliance with Section 16(a) is set forth in the section entitled "Section 16(a) Beneficial Ownership Reporting Compliance" on page 20 in the Proxy Statement of the Company for the Annual Meeting of Stockholders to be held on May 10, 2001, which section is incorporated herein by reference. CURRENT EXECUTIVE OFFICERS OF THE REGISTRANT Name and Age Present Principal Position and Other - ------------ Material Positions Held During Last Five Years ------------------------------------ Sheldon R. Erikson (59) President and Chief Executive Officer since January 1995. Chairman of the Board from 1988 to January 1995 and President and Chief Executive Officer from 1987 to January 1995 of The Western Company of North America. Thomas R. Hix (53) Senior Vice President of Finance and Chief Financial Officer since January 1995. Senior Vice President of Finance, Treasurer and Chief Financial Officer of The Western Company of North America from 1993 to January 1995. Franklin Myers (48) Senior Vice President since April 1995. General Counsel and Secretary from April 1995 to July 1999. President of the Cooper Energy Services division since August 1998. Senior Vice President and General Counsel from 1994 to April 1995 of Baker Hughes Incorporated. 16 Joseph D. Chamberlain (54) Vice President and Corporate Controller since April 1995. Controller - Financial Reporting from 1994 to April 1995 of Cooper Industries, Inc. A. John Chapman (59) Vice President since May 1998. President, Cooper Cameron Valves division since 1995. Managing director of Joy Manufacturing Co. Australia Pty. Ltd., a subsidiary of Joy Technologies Inc. from February 1990 to June 1995. Dalton L. Thomas (51) Vice President since July 1998. President, Cameron division since July 1998. Vice President, Eastern Hemisphere for Cameron from 1995 until July 1998. Vice President of Manufacturing and Support Services, Western Company of North America from 1989 to 1995. Jane L. Crowder (50) Vice President, Human Resources since May 1999. Vice President, Compensation and Benefits from 1996 to 1999, and Director, Compensation and Benefits from 1995 to 1996. Vice President, Human Resources of the CES division from September 1998 to October 1999. Vice President, Human Resources of The Western Company of North America from 1994 to 1995. William C. Lemmer (56) Vice President, General Counsel and Secretary since July 1999. Vice President, General Counsel and Secretary of Oryx Energy Company from 1994 to 1999. Robert J. Rajeski (55) Vice President since July 2000. President, Cooper Turbocompressor division since July 1999. Vice President and General Manager of Ingersoll-Dresser Pump Co., Engineered Pump division from 1994 to 1999. ITEM 11. EXECUTIVE COMPENSATION. The information for this item is set forth in the section entitled "Executive Compensation Tables" on pages 14-17 in the Proxy Statement of the Company for the Annual Meeting of Stockholders to be held on May 10, 2001, which section is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information concerning security ownership of certain beneficial owners and management is set forth in the sections entitled "Security Ownership of Certain Beneficial Owners" on page 19 and "Security Ownership of Management" on page 9 in the Proxy 17 Statement of the Company for the Annual Meeting of Stockholders to be held on May 10, 2001, which sections are incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. None PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT: (1) FINANCIAL STATEMENTS: All financial statements of the Registrant as set forth under Item 8 of this Annual Report on Form 10-K. (2) FINANCIAL STATEMENT SCHEDULES: Financial statement schedules are omitted because of the absence of conditions under which they are required or because all material information required to be reported is included in the consolidated financial statements and notes thereto. (3) EXHIBITS: 3.1 Amended and Restated Certificate of Incorporation of Cooper Cameron Corporation, dated June 30, 1995, filed as Exhibit 4.2 to the Registration Statement on Form S-8 of Cooper Cameron Corporation (Commission File No. 33-94948), and incorporated herein by reference. 3.2 Certificate of Amendment to the Restated Certificate of Incorporation of Cooper Cameron Corporation, filed as Exhibit 4.3 to the Registration Statement on Form S-8 of Cooper Cameron Corporation (Commission File No. 333-57995), and incorporated herein by reference. 3.3 First Amended and Restated Bylaws of Cooper Cameron Corporation, as amended December 12, 1996, filed as Exhibit 3.2 to the Annual Report on Form 10-K for 1996 of Cooper Cameron Corporation, and incorporated herein by reference. 4.1 Form of Rights Agreement, dated as of May 1, 1995, between Cooper Cameron Corporation and First Chicago Trust Company of New York, as 18 Rights Agent, filed as Exhibit 4.1 to the Registration Statement on Form S-8 of Cooper Cameron Corporation (Commission File No. 33-94948), and incorporated herein by reference. 4.2 First Amendment to Rights Agreement between Cooper Cameron Corporation and First Chicago Trust Company of New York, as Rights Agent, dated November 1, 1997, filed as Exhibit 4.2 to the Annual Report on Form 10-K for 1997 of Cooper Cameron Corporation, and incorporated herein by reference. 4.3 Registration Statement on Form S-3 filed with the Securities and Exchange Commission on May 4, 1998 (Registration Statement No. 333-51705) incorporated herein by reference. 10.1 Amended and Restated Cooper Cameron Corporation Long-Term Incentive Plan, incorporated by reference to the Cooper Cameron Corporation Proxy Statement for the Annual Meeting of Stockholders held on May 8, 1997. 10.2 First Amendment to the Amended and Restated Cooper Cameron Corporation Long-Term Incentive Plan, effective February 12, 1998, filed as Exhibit 4.5 to the Registration Statement on Form S-8 of Cooper Cameron Corporation (Commission File No. 333-53545), and incorporated herein by reference. 10.3 Second Amendment to the Amended and Restated Cooper Cameron Corporation Long-Term Incentive Plan, effective May 13, 1999, filed as Exhibit 4.8 to the Registration Statement on Form S-8 of Cooper Cameron Corporation (Commission File No. 333-37850), and incorporated herein by reference. 10.4 Third Amendment to the Amended and Restated Cooper Cameron Corporation Long-Term Incentive Plan, incorporated by reference to the Cooper Cameron Corporation 2000 Proxy Statement for the Annual Meeting of Stockholders held on May 11, 2000. 10.5 Cooper Cameron Corporation Broad Based 2000 Incentive Plan, filed as Exhibit 4.6 to the Registration Statement on Form S-8 of Cooper Cameron Corporation (Commission File No. 333-46638), and incorporated herein by reference. 10.6 Cooper Cameron Corporation Second Amended and Restated 1995 Stock Option Plan for Non-Employee Directors (Registration Statement on Form S-8 No. 333-79787), incorporated herein by reference. 19 10.7 Cooper Cameron Corporation Retirement Savings Plan, as Amended and Restated, effective April 1, 1996, filed as Exhibit 10.10 to the Annual Report on Form 10-K for 1997 of Cooper Cameron Corporation, and incorporated herein by reference. 10.8 Cooper Cameron Corporation Employee Stock Purchase Plan (Registration Statement No. 33-94948), incorporated herein by reference. 10.9 Cooper Cameron Corporation Supplemental Excess Defined Benefit Plan, filed as Exhibit 10.4 to the Registration Statement on Form S-4 of Cooper Cameron Corporation (Commission File No. 33-90288), and incorporated herein by reference. 10.10 First Amendment to Cooper Cameron Corporation Supplemental Excess Defined Benefit Plan, effective as of January 1, 1996, filed as Exhibit 10.7 to the Annual Report on Form 10-K for 1996 of Cooper Cameron Corporation, and incorporated herein by reference. 10.11 Cooper Cameron Corporation Supplemental Excess Defined Contribution Plan, filed as Exhibit 10.5 to the Registration Statement on Form S-4 of Cooper Cameron Corporation (Commission File No. 33-90288), and incorporated herein by reference. 10.12 First Amendment to Cooper Cameron Corporation Supplemental Excess Defined Contribution Plan, effective April 1, 1996, filed as Exhibit 10.9 to the Annual Report on Form 10-K for 1996 of Cooper Cameron Corporation, and incorporated herein by reference. 10.13 Cooper Cameron Corporation Compensation Deferral Plan (formerly the Cooper Cameron Corporation Management Incentive Compensation Deferral Plan), effective January 1, 1996, filed as Exhibit 10.10 to the Annual Report on Form 10-K for 1996 of Cooper Cameron Corporation, and incorporated herein by reference. 10.14 First Amendment to the Cooper Cameron Corporation Compensation Deferral Plan, effective July 1, 1998, filed as Exhibit 10.12 to the Annual Report on Form 10-K for 1999 of Cooper Cameron Corporation, and incorporated herein by reference. 10.15 Second Amendment to the Cooper Cameron Corporation Compensation Deferral Plan, effective January 1, 1999, filed as Exhibit 10.13 to the Annual Report on Form 10-K for 1999 of Cooper Cameron Corporation, and incorporated herein by reference. 10.16 Third Amendment to the Cooper Cameron Corporation Compensation Deferral Plan, effective January 1, 2000, filed as Exhibit 10.14 to the 20 Annual Report on Form 10-K for 1999 of Cooper Cameron Corporation, and incorporated herein by reference. 10.17 Cooper Cameron Corporation Directors Deferred Compensation Plan, filed as Exhibit 10.7 to the Registration Statement on Form S-4 of Cooper Cameron Corporation (Commission File No. 33-90288), and incorporated herein by reference. 10.18 Employment Agreement by and between Sheldon R. Erikson and Cooper Cameron Corporation, effective as of August 13, 1999, filed as Exhibit 10.16 to the Annual Report on Form 10-K for 1999 of Cooper Cameron Corporation, and incorporated herein by reference. 10.19 Employment Agreement by and between Thomas R. Hix and Cooper Cameron Corporation, effective as of September 1, 1999, filed as Exhibit 10.17 to the Annual Report on Form 10-K for 1999 of Cooper Cameron Corporation, and incorporated herein by reference. 10.20 Employment Agreement by and between Franklin Myers and Cooper Cameron Corporation, effective as of September 1, 1999, filed as Exhibit 10.18 to the Annual Report on Form 10-K for 1999 of Cooper Cameron Corporation, and incorporated herein by reference. 10.21 Form of Change in Control Agreement, effective November 11, 1999, by and between Cooper Cameron Corporation and Scott Amann, Joseph Chamberlain, John Chapman, Jane Crowder, William Givens, William Lemmer, Robert Rajeski, and Dalton Thomas, filed as Exhibit 10.19 to the Annual Report on Form 10-K for 1999 of Cooper Cameron Corporation, and incorporated herein by reference. 10.22 Form of Change in Control Agreement, effective July 12, 2000, by and between Cooper Cameron Corporation and Michael C. Jennings. 10.23 Amended and Restated Management Incentive Compensation Plan of Cooper Cameron Corporation, incorporated herein by reference to the Cooper Cameron Corporation 2000 Proxy Statement for the Annual Meeting of Stockholders held on May 11, 2000. 10.24 Change in Control Policy of Cooper Cameron Corporation, approved February 19, 1996, filed as Exhibit 10.18 to the Annual Report on Form 10-K for 1996 of Cooper Cameron Corporation, and incorporated herein by reference. 10.25 Executive Severance Program of Cooper Cameron Corporation, approved July 20, 2000. 21 10.26 Credit Agreement, dated as of June 30, 1995, among Cooper Cameron Corporation and certain of its subsidiaries and the banks named therein and First National Bank of Chicago, as agent, filed as Exhibit 4.5 to the Registration Statement on Form S-8 of Cooper Cameron Corporation (Commission File No. 33-94948), and incorporated herein by reference. 10.27 Amended and Restated Credit Agreement dated as of March 20, 1997, among Cooper Cameron Corporation and certain of its subsidiaries and the banks named therein and First National Bank of Chicago, as agent, filed as Exhibit 10.21 to the Annual Report on Form 10-K for 1996 of Cooper Cameron Corporation, and incorporated herein by reference. 10.28 Amendment No. 2 to the Amended and Restated Credit Agreement, among Cooper Cameron Corporation and certain of its subsidiaries and the banks named therin and First National Bank of Chicago, as agent, dated as of July 21, 1999, filed as Exhibit 10.30 to the Annual Report on Form 10-K for 1999 of Cooper Cameron Corporation, and incorporated herein by reference. 10.29 Individual Account Retirement Plan for Hourly-Paid Employees at the Cooper Cameron Corporation Mount Vernon Plant, filed as Exhibit 4.6 to the Registration Statement on Form S-8 (Registration No. 333-58005), incorporated herein by reference. 10.30 Individual Account Retirement Plan for Bargaining Unit Employees at the Cooper Cameron Corporation Missouri City, Texas Facility, filed as Exhibit 4.6 to the Registration Statement on Form S-8 (Registration No. 333-57995), incorporated herein by reference. 10.31 Individual Account Retirement Plan for Bargaining Unit Employees at the Cooper Cameron Corporation Buffalo, New York Plant, filed as Exhibit 4.6 to the Registration Statement on Form S-8 (Registration No. 333-57991), incorporated herein by reference. 10.32 Individual Account Retirement Plan for Cooper Cameron Corporation Hourly Employees, UAW, at the Superior Plant, filed as Exhibit 4.6 to the Registration Statement on Form S-8 (Registration No. 333-57997), incorporated herein by reference. 10.33 Individual Account Retirement Plan for Bargaining Unit Employees at the Cooper Cameron Corporation Grove City Facility, filed as Exhibit 4.6 to the Registration Statement on Form S-8 (Registration No. 333-58003), incorporated herein by reference. 22 10.34 Cooper Cameron Corporation Savings-Investment Plan for Hourly Employees, filed as Exhibit 4.7 to the Registration Statement on Form S-8 (Registration No. 333-77641), incorporated herein by reference. 10.35 Individual Account Retirement Plan for Cooper Cameron Corporation Hourly Employees, IAM, at the Superior Plant, filed as Exhibit 4.6 to the Registration Statement on Form S-8 (Registration No. 333-58001), incorporated herein by reference. 13.1 Portions of the 2000 Annual Report to Stockholders are included as an exhibit to this report and have been specifically incorporated by reference elsewhere herein. 21.1 Subsidiaries of registrant. 23.1 Consent of Independent Auditors. (b) REPORTS ON FORM 8-K The Company has filed no reports on Form 8-K during the fourth quarter of 2000 or through March 23, 2001. 23 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 23rd day of March, 2001. COOPER CAMERON CORPORATION REGISTRANT /S/ JOSEPH D. CHAMBERLAIN BY:_______________________________________ (JOSEPH D. CHAMBERLAIN) Vice President and Corporate Controller (Principal Accounting Officer) PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED ON THIS 23RD DAY OF MARCH, 2001, BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED. SIGNATURE TITLE --------- ----- /s/ Nathan M. Avery Director - --------------------------- (Nathan M. Avery) /s/ C. Baker Cunningham Director - --------------------------- (C. Baker Cunningham) /s/ Grant A. Dove Director - --------------------------- (Grant A. Dove) /s/ Sheldon R. Erikson Chairman, President and Chief - --------------------------- Executive Officer (principal (Sheldon R. Erikson) executive officer) /s/ Michael E. Patrick Director - --------------------------- (Michael E. Patrick) /s/ David Ross III Director - --------------------------- (David Ross III) /s/ Michael J. Sebastian Director - --------------------------- (Michael J. Sebastian) /s/ Thomas R. Hix Senior Vice President of - --------------------------- Finance and Chief Financial (Thomas R. Hix) Officer (principal financial officer) 24 EXHIBIT INDEX
EXHIBIT SEQUENTIAL NUMBER DESCRIPTION PAGE NO. - ---------- --------------------------------------------------------------- ---------- 3.1 Amended and Restated Certificate of Incorporation of Cooper Cameron Corporation, dated June 30, 1995, filed as Exhibit 4.2 to the Registration Statement on Form S-8 of Cooper Cameron Corporation (Commission File No. 33-94948), and incorporated herein by reference. 3.2 Certificate of Amendment to the Restated Certificate of Incorporation of Cooper Cameron Corporation, filed as Exhibit 4.3 to the Registration Statement on Form S-8 of Cooper Cameron Corporation (Commission File No. 333-57995), and incorporated herein by reference. 3.3 First Amended and Restated Bylaws of Cooper Cameron Corporation, as amended December 12, 1996, filed as Exhibit 3.2 to the Annual Report on Form 10-K for 1996 of Cooper Cameron Corporation, and incorporated herein by reference. 4.1 Form of Rights Agreement, dated as of May 1, 1995, between Cooper Cameron Corporation and First Chicago Trust Company of New York, as Rights Agent, filed as Exhibit 4.1 to the Registration Statement on Form S-8 of Cooper Cameron Corporation (Commission File No. 33-94948), and incorporated herein by reference. 4.2 First Amendment to Rights Agreement between Cooper Cameron Corporation and First Chicago Trust Company of New York, as Rights Agent, dated November 1, 1997, filed as Exhibit 4.2 to the Annual Report on Form 10-K for 1997 of Cooper Cameron Corporation, and incorporated herein by reference. 4.3 Registration Statement on Form S-3 filed with the Securities and Exchange Commission on May 4, 1998 (Registration Statement No. 333-51705) incorporated herein by reference. 10.1 Amended and Restated Cooper Cameron Corporation Long-Term Incentive Plan, incorporated by reference to the Cooper Cameron Corporation Proxy Statement for the Annual Meeting of Stockholders held on May 8, 1997.
10.2 First Amendment to the Amended and Restated Cooper Cameron Corporation Long-Term Incentive Plan, effective February 12, 1998, filed as Exhibit 4.5 to the Registration Statement on Form S-8 of Cooper Cameron Corporation (Commission File No. 333- 53545), and incorporated herein by reference. 10.3 Second Amendment to the Amended and Restated Cooper Cameron Corporation Long-Term Incentive Plan, effective May 13, 1999, filed as Exhibit 4.8 to the Registration Statement on Form S-8 of Cooper Cameron Corporation (Commission File No. 333-37850), and incorporated herein by reference. 10.4 Third Amendment to the Amended and Restated Cooper Cameron Corporation Long-Term Incentive Plan, incorporated by reference to the Cooper Cameron Corporation 2000 Proxy Statement for the Annual Meeting of Stockholders held on May 11, 2000. 10.5 Cooper Cameron Corporation Broad Based 2000 Incentive Plan, filed as Exhibit 4.6 to the Registration Statement on Form S-8 of Cooper Cameron Corporation (Commission File No. 333-46638), and incorporated herein by reference. 10.6 Cooper Cameron Corporation Second Amended and Restated 1995 Stock Option Plan for Non-Employee Directors (Registration Statement on Form S-8 No. 333-79787), incorporated herein by reference. 10.7 Cooper Cameron Corporation Retirement Savings Plan, as Amended and Restated, effective April 1, 1996, filed as Exhibit 10.10 to the Annual Report on Form 10-K for 1997 of Cooper Cameron Corporation, and incorporated herein by reference. 10.8 Cooper Cameron Corporation Employee Stock Purchase Plan (Registration Statement No. 33-94948), incorporated herein by reference. 10.9 Cooper Cameron Corporation Supplemental Excess Defined Benefit Plan, filed as Exhibit 10.4 to the Registration Statement on Form S-4 of Cooper Cameron Corporation (Commission File No. 33- 90288), and incorporated herein by reference. 10.10 First Amendment to Cooper Cameron Corporation Supplemental Excess Defined Benefit Plan, effective as of January 1, 1996, filed as Exhibit 10.7 to the Annual Report on Form 10-K for 1996 of Cooper Cameron Corporation, and incorporated herein by reference. 10.11 Cooper Cameron Corporation Supplemental Excess Defined Contribution Plan, filed as Exhibit 10.5 to the Registration Statement on Form S-4 of Cooper Cameron Corporation (Commission File No. 33-90288), and incorporated herein by reference. 10.12 First Amendment to Cooper Cameron Corporation Supplemental Excess Defined Contribution Plan, effective April 1, 1996, filed as Exhibit 10.9 to the Annual Report on Form 10-K for 1996 of Cooper Cameron Corporation, and incorporated herein by reference. 10.13 Cooper Cameron Corporation Compensation Deferral Plan (formerly the Cooper Cameron Corporation Management Incentive Compensation Deferral Plan), effective January 1, 1996, filed as Exhibit 10.10 to the Annual Report on Form 10-K for 1996 of Cooper Cameron Corporation, and incorporated herein by reference. 10.14 First Amendment to the Cooper Cameron Corporation Compensation Deferral Plan, effective July 1, 1998, filed as Exhibit 10.12 to the Annual Report on Form 10-K for 1999 of Cooper Cameron Corporation, and incorporated herein by reference. 10.15 Second Amendment to the Cooper Cameron Corporation Compensation Deferral Plan, effective January 1, 1999, filed as Exhibit 10.13 to the Annual Report on Form 10-K for 1999 of Cooper Cameron Corporation, and incorporated herein by reference. 10.16 Third Amendment to the Cooper Cameron Corporation Compensation Deferral Plan, effective January 1, 2000, filed as Exhibit 10.14 to the Annual Report on Form 10-K for 1999 of Cooper Cameron Corporation, and incorporated herein by reference. 10.17 Cooper Cameron Corporation Directors Deferred Compensation Plan, filed as Exhibit 10.7 to the Registration Statement on Form S-4 of Cooper Cameron Corporation (Commission File No. 33-90288), and incorporated herein by reference. 10.18 Employment Agreement by and between Sheldon R. Erikson and Cooper Cameron Corporation, effective as of August 13, 1999, filed as Exhibit 10.16 to the Annual Report on Form 10-K for 1999 of Cooper Cameron Corporation, and incorporated herein by reference. 10.19 Employment Agreement by and between Thomas R. Hix and Cooper Cameron Corporation, effective as of September 1, 1999, filed as Exhibit 10.17 to the Annual Report on Form 10-K for 1999 of Cooper Cameron Corporation, and incorporated herein by reference. 10.20 Employment Agreement by and between Franklin Myers and Cooper Cameron Corporation, effective as of September 1, 1999, filed as Exhibit 10.18 to the Annual Report on Form 10-K for 1999 of Cooper Cameron Corporation, and incorporated herein by reference. 10.21 Form of Change in Control Agreement, effective November 11, 1999, by and between Cooper Cameron Corporation and Scott Amann, Joseph Chamberlain, John Chapman, Jane Crowder, William Givens, William Lemmer, Robert Rajeski, and Dalton Thomas, filed as Exhibit 10.19 to the Annual Report on Form 10-K for 1999 of Cooper Cameron Corporation, and incorporated herein by reference. 10.22 Form of Change in Control Agreement, effective July 12, 2000, by and between Cooper Cameron Corporation and Michael C. Jennings. 10.23 Amended and Restated Management Incentive Compensation Plan of Cooper Cameron Corporation, incorporated herein by reference to the Cooper Cameron Corporation 2000 Proxy Statement for the Annual Meeting of Stockholders held on May 11, 2000. 10.24 Change in Control Policy of Cooper Cameron Corporation, approved February 19, 1996, filed as Exhibit 10.18 to the Annual Report on Form 10-K for 1996 of Cooper Cameron Corporation, and incorporated herein by reference. 10.25 Executive Severance Program of Cooper Cameron Corporation, approved July 20, 2000. 10.26 Credit Agreement, dated as of June 30, 1995, among Cooper Cameron Corporation and certain of its subsidiaries and the banks named therein and First National Bank of Chicago, as agent, filed as Exhibit 4.5 to the Registration Statement on Form S-8 of Cooper Cameron Corporation (Commission File No. 33- 94948), and incorporated herein by reference. 10.27 Amended and Restated Credit Agreement dated as of March 20, 1997, among Cooper Cameron Corporation and certain of its subsidiaries and the banks named therein and First National Bank of Chicago, as agent, filed as Exhibit 10.21 to the Annual Report on Form 10-K for 1996 of Cooper Cameron Corporation, and incorporated herein by reference. 10.28 Amendment No. 2 to the Amended and Restated Credit Agreement, among Cooper Cameron Corporation and certain of its subsidiaries and the banks named therein and First National Bank of Chicago, as agent, dated as of July 21, 1999, filed as Exhibit 10.30 to the Annual Report on Form 10-K for 1999 of Cooper Cameron Corporation, and incorporated herein by reference. 10.29 Individual Account Retirement Plan for Hourly-Paid Employees at the Cooper Cameron Corporation Mount Vernon Plant, filed as Exhibit 4.6 to the Registration Statement on Form S-8 (Registration No. 333-58005), incorporated herein by reference. 10.30 Individual Account Retirement Plan for Bargaining Unit Employees at the Cooper Cameron Corporation Missouri City, Texas Facility, filed as Exhibit 4.6 to the Registration Statement on Form S-8 (Registration No. 333-57995), incorporated herein by reference. 10.31 Individual Account Retirement Plan for Bargaining Unit Employees at the Cooper Cameron Corporation Buffalo, New York Plant, filed as Exhibit 4.6 to the Registration Statement on Form S-8 (Registration No. 333-57991), incorporated herein by reference. 10.32 Individual Account Retirement Plan for Cooper Cameron Corporation Hourly Employees, UAW, at the Superior Plant, filed as Exhibit 4.6 to the Registration Statement on Form S-8 (Registration No. 333-57997), incorporated herein by reference. 10.33 Individual Account Retirement Plan for Bargaining Unit Employees at the Cooper Cameron Corporation Grove City Facility, filed as Exhibit 4.6 to the Registration Statement on Form S-8 (Registration No. 333-58003), incorporated herein by reference. 10.34 Cooper Cameron Corporation Savings-Investment Plan for Hourly Employees, filed as Exhibit 4.7 to the Registration Statement on Form S-8 (Registration No. 333-77641), incorporated herein by reference. 10.35 Individual Account Retirement Plan for Cooper Cameron Corporation Hourly Employees, IAM, at the Superior Plant, filed as Exhibit 4.6 to the Registration Statement on Form S-8 (Registration No. 333-58001), incorporated herein by reference. 13.1 Portions of the 2000 Annual Report to Stockholders are included as an exhibit to this report and have been specifically incorporated by reference elsewhere herein. 21.1 Subsidiaries of registrant. 23.1 Consent of Independent Auditors. EX-10.22 2 0002.txt CHANGE IN CONTROL AGREEMENT EXHIBIT 10.22 [Cooper Cameron Corporation Letterhead] July 12, 2000 Mr. Michael C. Jennings Vice President & Treasurer Corporate Houston, Texas Dear Mike: Cooper Cameron Corporation (the "Company") considers the establishment and maintenance of a sound and vital management to be essential for the protection and enhancement of the best interests of the Company and its shareholders. The Company recognizes that, as is the case with many publicly-held corporations, the possibility of a "Change of Control" (as defined herein) may arise and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company and its shareholders. Accordingly, the board of directors of the Company (the "Board") has determined that appropriate steps should be taken to assure the Company of the continuation of your service and to reinforce and encourage the attention and dedication of members of the Company's management to their assigned duties without distraction in circumstances arising from the possibility of a Change of Control of the Company. In particular the Board believes it important, should the Company or its shareholders receive a proposal for or notice of transfer of control of the Company, or consider one itself, that you be able to assess and advise the Company whether such transfer would be or is in the best interests of the Company and its shareholders, and to take such other action regarding such transfer as the Board might determine to be appropriate without being influenced by the uncertainties of your own situation. In order to induce you to remain in the employ of the Company, this letter agreement (the "Agreement"), prepared pursuant to authority granted by the Board, sets forth the compensation and severance benefits which the Company agrees will be provided to you should your employment with the Company be terminated in connection with a Change of Control under the circumstances described below as well as certain other benefits which will be made available to you should you be employed by the Company on the Effective Date of a Change of Control. Reference is made to Annex I hereto for definitions of certain terms used in this Agreement, and such definitions are incorporated herein by such reference with the same effect as if set forth herein. Page 2 1. Termination in Connection with a Change of Control. (a) If there is a termination of your employment with the Company either by the Company without Cause or by you for Good Reason during the period between the Effective Date of a Change of Control and 2 years following the Change of Control (the "Effective Period"), and if such Effective Date occurs during the life of this Agreement, you shall be entitled to the following benefits , whether or not this Agreement has been cancelled prior to the time of your termination: (i) all benefits conferred upon you by the Severance Package, and (ii) in addition, all benefits payable under the provisions either of the Company's employee and executive Plans in which you are a participant immediately prior to the Effective Date, or of those plans in existence at the time of your Termination Date, whichever are more favorable to you, in accordance with the terms and conditions of such Plans or plans, such benefits to be paid under such Plans or plans and not under this Agreement. (b) Notwithstanding the above, you shall not be entitled to any such benefits if your termination results from your death, disability or retirement, unless your death, disability or retirement occurs (i) during the Effective Period and (ii), with respect to the benefits conferred by the Severance Package only, after either it has been decided that you will be terminated without Cause during the Effective Period, or you have given notice of termination for Good Reason during the Effective Period. (c) You shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment, nor shall the amount of any payment provided for in this Agreement be reduced by any compensation earned by you as the result of employment by another employer after any Termination Date. 2. Procedures for Termination. (a) If it is intended that your employment be terminated by you for Good Reason you shall transmit to the Company written notice setting forth the particulars upon which you base your determination that Good Reason exists and, only if the stated basis therefore is capable of being cured, requesting a cure within 10 days. Failing such a cure, a "final separation" shall then occur, and if such stated basis is not capable of cure by the Company, "final separation" shall occur co-extensive with delivery of the notice. For purposes of this Agreement, a "Termination Date" shall be deemed to have occurred upon the date of such "final separation". (b) If it is intended that your employment be terminated by the Company without Cause, a "Termination Date" shall be deemed to have occurred upon the 30th day following the date of receipt of any notice so stating, or upon the date specified in the notice, whichever is later. If it is intended that your employment be terminated by the Company for Cause, if you contest such termination pursuant to any proceeding initiated pursuant to Section 7 hereof within 15 days of receipt of such notice, and it is ultimately determined that cause did not Page 3 exist, then (anything else in the Agreement to the contrary notwithstanding) a "Termination Date" shall be deemed to have occurred upon the final resolution of such proceeding . 3. LTIP Benefit Acceleration. Immediately upon any Change of Control, all contingent compensation rights issued to you under the LTIP Plan which are then outstanding shall become vested, exercisable, distributable and unrestricted (any contrary provision in the LTIP Plan notwithstanding) whether or not you continue to be employed by the Company. You shall have the right immediately upon any written request by you to the Company, to (i) exercise all or any portion of all your options covered (including, at your sole election, any associated Tandem SAR) by the LTIP Plan and to have the underlying Shares issued to you, (ii) have issued to you on a non-forfeitable basis any or all Shares covered by Restricted Stock Awards held by you under the LTIP Plan, (iii) have issued to you any or all Performance Shares and/or Performance Units held by you in the LTIP Plan, (iv) exercise all or any portion of any LTIP Plan Freestanding SAR held by you, and (v) obtain the full benefit of any other contingent compensation rights to which you may be entitled under the LTIP Plan, in each case as though all applicable Performance Targets had been met or achieved at maximum levels for all Performance Periods (including those extending beyond the Effective Date) and any and all other LTIP Plan contingencies had been satisfied in full at the date of the Change of Control and the maximum possible benefits thereunder had been earned at the date of the Change of Control. 4. Conditional Share Purchase Obligation. (a) If a Change of Control occurs as a consequence of a tender offer or exchange offer (the "Tender Offer"), the Company shall, if requested by you, purchase from you (whether a Termination Date has occurred following the Change of Control) for cash on any business day selected by you upon not less than ten days' notice to the Company, which day shall not be less than ten days following consummation of the Tender Offer nor more than three years after the Effective Date, up to that number of Shares which shall be equal to the product of (x) the number of Shares acquired by you upon exercise or distribution of any benefit under the Bonus Plan or LTIP Plan prior to consummation of the Tender Offer, multiplied by (y) the decimal equivalent of (I) the number of Shares accepted for purchase or exchange in the Tender Offer, divided by (II) the number of Shares timely and validly tendered pursuant to the Tender Offer. In the event the above obligation to purchase Shares occurs by reason of a cash tender offer or a combination cash tender offer and exchange offer, the cash price per share to be paid to you hereunder shall be equal to the highest price paid in cash pursuant to the Tender Offer. In the event such obligation occurs by reason of an exchange offer, the cash price per share to be paid to you hereunder shall be equal to the closing price, if traded on a stock exchange, or the average bid and asked prices, if traded in the over-the-counter market, of the security of the person so exchanged for the Shares (the "Exchange Security") on the first day on which the Exchange Security could have been sold by you on such exchange or in the over-the-counter market, as the case may be, in a regular broker's transaction had your Shares been tendered and accepted, multiplied by the number of Exchange Securities (or fraction thereof) issued in the Tender Offer for each Company Share; and Page 4 (b) If a Change of Control occurs pursuant to a Tender Offer and (i) a merger, consolidation, reorganization, sale, spin-off, or purchase of assets under which all remaining outstanding Shares will be converted into or become exchangeable for cash, or for securities ("Merger Security") issued or to be issued by the Person who made the Tender Offer (or a subsidiary or affiliate of such Person), is thereafter proposed to the Company or its shareholders, and (ii) such merger, consolidation, reorganization or purchase of assets occurs less than three years after the Effective Date, and (iii) the amounts of cash into which each Share would be converted if the transaction is effected wholly for cash, or the Merger Security Value (as defined below) if such transaction is effected wholly for Merger Securities, or the sum of the cash and the Merger Security Value if the Transaction is effected partly for cash and partly for Merger Securities, as the case may be, is less than 95% of the per share price that would have been paid by the Company for such portion of your Shares had you exercised your option to require the Company to purchase such Shares under Section 4(a) above, the Company shall pay you (whether or not a Termination Date has occurred following a Change of Control), an amount in cash equal to the difference between the aggregate price you would have received from the number of Shares the Company would have been required to purchase from you had you exercised such option under Section 4(a) and the amount of cash and/or the Merger Security Value received for the same number of Shares in such merger, consolidation, reorganization or purchase of assets. Such cash payment shall be made to you on a business day selected by you upon no less than ten-calendar days' notice to the Company or its Successor (as hereinafter defined). For purposes of this Section 4(b), "Merger Security Value" shall mean the closing price, if traded on a stock exchange, or the average bid and asked prices if traded in the over-the-counter market, of the Merger Security on the first day on which the Merger Security could have been sold by you on such exchange or in the over-the-counter market, as the case may be, in a regular broker's transaction, multiplied by the number of Merger Securities (or fraction thereof) for which each Share was exchangeable or into which each Share was convertible. If no public market develops for the Merger Security within 30 days from the date of its issue, however, "Merger Security Value" shall mean the fair market value of such Merger Security (on a per unit basis in the written opinion of a nationally recognized investment banking firm acceptable to you) on the effective date of the merger, consolidation, reorganization or purchase of assets, as the case may be, multiplied by the number of Merger Securities (or fraction thereof) for which each Share was exchangeable or into which each Share was convertible. 5. Certain Rights with Respect to Options. (a) In addition to any other rights or privileges held by a holder with respect to an option covered by the LTIP Plan ("LTIP Option") (including the provisions of Section 3 and Section 4), upon a Change of Control of the Company, the holder shall have the right to exchange such option for a new option ("New Option"), that shall be issued according to the following: (i) the New Option shall be immediately exercisable; (ii) the New Option shall have a term equal to the remaining term of the LTIP Option it replaces (and shall be exercisable through such term); Page 5 (iii) the New Option will give the holder the right to acquire shares of the publicly traded common equity of the Company or any successor or direct or indirect parent of either ("Replacement Common Stock") (in the event of two or more classes of common equity, the common equity used shall be determined by the Compensation Committee of the Board of Directors of the Company existing prior to a Change of Control); (iv) the exercise price used for the New Option ("New Exercise Price") for acquiring a share of Replacement Common Stock shall be determined at the time of the Change of Control by taking (x) the higher of (1) the aggregate value (as of the date of the Change of Control) equal to the merger or acquisition consideration paid or payable in the Change of Control, on a per share basis, or (2) the highest price paid for a share of Company common stock over the New York Stock Exchange (or other primary exchange) during the 12 months prior to the Change of Control, and (y) dividing such amount into the per share exercise price of the LTIP Option; with the result multiplied by the Replacement Common Stock closing price on its principal stock exchange on the day of the Change in Control, or if traded in the over-the-counter market and not on an exchange, the last bid price in such market; (v) the number of shares of Replacement Common Stock subject to the New Option shall be the number necessary, using the New Exercise Price, to provide an aggregate value (as of the date of the Change of Control) equal to the higher of (x) the merger or acquisition consideration paid or payable in the Change of Control on a per share basis, or (y) the highest price paid for a share of Company common stock over the New York Stock Exchange (or other primary exchange) during the 12 months prior to the Change of Control; (vi) if there is no publicly traded common equity of the Company, or any successor or any direct or indirect parent of either, then the New Option shall be with respect to shares of the direct or indirect parent of the Company, and if no such parent then the Company, and if the Company no longer exists, then the successor to the Company; (b) In addition to any other rights or privileges held by a holder with respect to an option covered by the LTIP Plan (including the provisions of Section 3 and Section 4), if a Change of Control occurs, you shall have the right, but not the obligation, to tender, within 30 days of such a Change of Control, any option to the Company (or any successor to the Company) and receive in exchange therefor a lump sum cash amount equal to the Black-Scholes value of the option, without discount for risk of forfeiture and nontransferability determined by using the highest Black-Scholes valuation during the one-year period prior to the Change of Control. Any Black-Scholes valuation shall be performed on a basis consistent with the methodology set forth on Exhibit A to this Agreement. 6. Excise Tax. (a) Any other provision of this Agreement to the contrary notwithstanding, if the present value (as defined herein) of the total amount of payments and benefits to be paid or provided to you under this Agreement which are considered to be "parachute payments" within the meaning of Section 280G(b) of the Internal Revenue Code of 1986, as amended (the "Code"), when added to any other such "parachute payments" received by you from the Page 6 Company upon or after a Change of Control, whether or not under this Agreement, is in excess of the amount you can receive without causing you to be subject to an excise tax with respect to such amount on account of Code Section 4999, the Company shall pay to you an additional amount (hereinafter referred to as the "Excise Tax Premium"). The Excise Tax Premium shall be equal to the excise tax determined under Code Sections 280G and 4999 attributable to the total amount of payments and benefits to be paid or provided to you under this Agreement and any other "parachute payments" received by you upon or after a Change of Control. The Excise Tax Premium shall also include any amount attributable to excise tax on the Excise Tax Premium. The Company shall also pay to you an additional amount (the "Additional Amount") such that the net amount received by you, after paying any applicable Excise Tax Premium and any federal or state income, excise or other tax on such additional amount, shall be equal to the amount that you would have received if such Excise Tax Premium were not applicable. You shall be deemed to pay income taxes on the date of termination of your employment at the highest marginal rate of income taxation in effect in your taxing jurisdiction. The Additional Amount shall include any amount attributable to income, excise or other tax on the Additional Amount. (b) Not later than 30 days following your Termination Date as provided herein, the independent public accountants acting as auditors for the Company on the date of the Change of Control (or another accounting firm designated by you) shall determine whether the sum of the present value of any "parachute payments" payable under this Agreement and the present value of any other "parachute payments" received by you from the Company upon or after a Change of Control is in excess of the amount you can receive without causing you to be subject to an excise tax with respect to such amount on account of Code Section 4999, and shall determine the amount of any Excise Tax Premium and Additional Amount payable to you. The Excise Tax Premium and Additional Amount shall be paid to you as soon as practicable but in no event later than 35 days following your Termination Date, and shall be net of any amounts required to be withheld for taxes. (c) For purposes of this Section 6C, "present value" means the value determined in accordance with the principles of Section 1274 (b) (2) of the Code under the rules provided in Treasury Regulations under Section 280G of the Code. (d) References to Code Section 280G herein are specific references to Section 280G as added to the Code by the Tax Reform Act of 1984 and as amended by the Tax Reform Act of 1986. To the extent Code Section 280G is again amended prior to the termination of this Agreement, or is replaced by a successor statute, the provisions of this Section 6 shall be deemed modified without further action of the parties in a manner consistent with such amendments or successor statutes, as the case may be. In the event that Code Section 280G or any successor statute is repealed, this Section 6 shall cease to be effective on the effective date of such repeal. The parties recognize that Treasury Regulations under Code Sections 280G and 4999 may affect the amount that may be paid hereunder and agree that, upon the issuance of any such regulations, this Agreement may be modified as in good faith may be deemed necessary in light of the provisions of such regulations to achieve the purposes hereof, and that consent to such modifications shall not be unreasonably withheld. Page 7 7. Dispute Resolution. (a) This Agreement shall be governed in all respects, including as to validity, interpretation and effect, by the internal laws of the State of Texas without regard to choice of law principles. (b) It is irrevocably agreed that if any dispute arises between us under this Agreement: (i) exclusive jurisdiction shall be in the lowest Texas state court of general jurisdiction sitting in Harris County, Texas, (ii) we are each at the time present in Texas for the purpose of conferring personal jurisdiction; (iii) any such action may be brought in such court, and any objection that the Company or you may now or hereafter have to the venue of such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court is waived, and we each agree not to plead or claim the same, (iv) service of process in any such proceeding or action may be effected by mailing a copy thereof by registered or certified mail, return receipt requested (or any substantially similar form of mail), postage prepaid, to such party at the address provided in Section 11 hereof, and (v) prior to any trial on the merits, we will submit to court supervised, non-binding mediation. (c) Notwithstanding any contrary provision of Texas law, the Company shall have the burden of proof with respect to any of the following: (i) that Cause existed at the time any notice was given to you under Section 2 (ii) that Good Reason did not exist at the time notice was given to the Company under Section 2; and (iii) that a Change of Control has not occurred. 8. Successors; Binding Agreement. (a) In the event any Successor (as defined below) does not assume this Agreement by operation of law the Company will seek to have any Successor, by agreement in form and substance satisfactory to you, expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it. If there has been a Change of Control prior to, or a Change of Control will result from, any such succession, then failure of the Company to obtain at your request such agreement prior to or upon the effectiveness of any such succession (unless assumption occurs as a matter of law) shall constitute Good Reason for termination by you of your employment and, upon delivery of a notice of termination by you to the Company, you shall be entitled to the benefits provided for herein. "Successor" shall mean any Person that succeeds to, or has the ability to control, the Company's business as a whole, directly by merger, consolidation, spin-off or similar transaction, or indirectly by purchase of the Company's Voting Securities or acquisition of all or substantially all of the assets of the Company. (b) This Agreement shall inure to the benefit of and be enforceable by your personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. Page 8 9. Fees and Expenses. The Company shall pay all legal fees and expenses incurred by you as a result of (i) your termination following a Change of Control (including all such fees and expenses, if any, incurred in contesting or disputing any such termination) as well as (ii) your seeking to interpret, obtain, assert or enforce any right or benefit conferred upon you by this Agreement. 10. Notices. Any and all notices required or permitted to be given hereunder shall be in writing and shall be deemed to have been given when delivered in person to the persons specified below or deposited in the United States mail, certified or registered mail, postage prepaid and addressed as follows: If to the Company: Cooper Cameron Corporation 515 Post Oak Boulevard, Suite 1200 Houston, Texas 77027 Attention: Chief Executive Officer If to you: Michael C. Jennings 4028 Riley Houston, Texas 77005 Either party may change, by the giving of notice in accordance with this Section 10, the address to which notices are thereafter to be sent. 11. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 12. Survival. All obligations undertaken and benefits conferred pursuant to this Agreement, shall survive any termination of your employment and continue until performed in full. 13. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in writing signed by you and the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The internal laws of the State of Texas shall govern the validity, interpretation, construction and performance of this Agreement. 14. Duplicate Originals. This Agreement has been executed in duplicate originals, with one to be held by each of the parties hereto. Page 9 If this letter correctly sets forth our understanding with respect to the subject matter hereof, please sign and return one copy of this letter to the Company. Sincerely, COOPER CAMERON CORPORATION /s/ Sheldon R. Erikson BY:_______________________ Sheldon R. Erikson Chairman, President and Chief Executive Officer Agreed to as of the 14th day of July, 2000 /s/ Michael C. Jennings - ----------------------- Michael C. Jennings ANNEX I TO AGREEMENT DATED JULY 12, 2000 BETWEEN COOPER CAMERON CORPORATION AND MICHAEL C. JENNINGS Definition of Certain Terms "BONUS PLAN" means for each year, the Company's Management Incentive Compensation Plan or any other Plan adopted by the Board which provides for the payment of additional compensation on an annual basis to senior executive officers contingent upon the Company's results of operations for that specific year, in either case as such Plan shall be amended or modified to, but not on or after, any Effective Date. "BYLAWS" means the bylaws of the Company as in effect at the date hereof and as the same shall be amended or otherwise modified to, but not on or after, any Effective Date. "CAUSE" means (i) your conviction by a court of competent jurisdiction, from which conviction no further appeal can be taken, of a felony- grade crime involving moral turpitude, or (ii) your willful failure to perform substantially your duties with the Company (other than a failure due to physical or mental illness) which is materially and demonstrably injurious to the Company. No act or failure to act on your part shall be considered "willful" unless done, or omitted to be done, by you in bad faith and without reasonable belief that your action or omission was in, or not opposed to, the best interests of the Company. "CHANGE OF CONTROL" means the earliest date at which: (i) any Person is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's outstanding Voting Securities, other than through the purchase of Voting Securities directly from the Company through a private placement; or (ii) individuals who constitute the Board on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least two-thirds of the directors comprising the Incumbent Board shall from and after such election be deemed to be a member of the Incumbent Board; or (iii) the Company is merged or consolidated with another corporation or entity and as a result of such merger or consolidation less than 60% of the outstanding Voting Securities of the surviving or resulting corporation or entity shall then be owned by the former stockholders of the Company; or A-1 (iv) a tender offer or exchange offer is made and consummated by a Person other than the Company for the ownership of 20% or more of the Voting Securities of the Company then outstanding; or (v) all or substantially all of the assets of the Company are sold or transferred to a Person as to which (A) the Incumbent Board does not have authority (whether by law or contract) to directly control the use or further disposition of such assets and (B) the financial results of the Company and such Person are not consolidated for financial reporting purposes. Anything else in this definition to the contrary notwithstanding, no Change of Control shall be deemed to have occurred by virtue of any transaction which results in you, or a group of Persons which includes you, acquiring more than 20% of either the combined voting power of the Company's outstanding Voting Securities or the Voting Securities of any other corporation or entity which acquires all or substantially all of the assets of the Company, whether by way of merger, consolidation, sale of such assets or otherwise. "DEFINED BENEFIT PLAN" means the Company's Retirement Plan and Supplemental Excess Defined Benefit Plan, as the same shall be amended or modified to, but not on or after, any Effective Date. "DEFINED CONTRIBUTION PLAN" means the Company's Retirement Savings Plan and Supplemental Excess Defined Contribution Plan, as the same shall be amended or modified to, but not on or after, any Effective Date. "DISABILITY" means your continuing full-time absence from your duties with the Company for 180 DAYS OR LONGER AS A RESULT OF PHYSICAL OR MENTAL INCAPACITY. "EFFECTIVE DATE" means the earliest date upon which (i) any of the events set forth under the definition of Change of Control shall have occurred, (ii) the receipt by the Company of a Schedule 13D stating the intention of any Person to take actions which, if accomplished, would constitute a Change of Control, (iii) the public announcement by any Person of its intention to take any such action, in each case without regard for any contingency or condition which has not been satisfied on such date, (iv) the agreement by the Company to enter into a transaction which, if consummated, would result in a Change of Control, or (v) consideration by the Board of a transaction which, if consummated, would result in a Change of Control. If, however, an Effective Date occurs but the proposed transaction to which it relates ceases to be actively considered or it is not consummated within 12 months of such Effective Date, the Effective Period will be deemed not to have commenced for purposes of this Agreement. If an Effective Date occurs with respect to a proposed transaction which ceases to be actively considered but for which active consideration is revived, the Effective Date with respect to the Change of Control that ultimately occurs shall be that date when consideration was revived and carried through to consummation. A-2 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "GOOD REASON" means any of the following: (i) except as a result of your death or Retirement, or following the receipt by you of a Notice of Termination for Cause or due to Disability, a change in your status, title(s) or position(s) with the Company, including as an officer of the Company, which, in your reasonable judgment, does not represent a promotion, with commensurate adjustment of compensation, from your status, title(s) and position(s) immediately prior to the Effective Date; or the assignment to you of any duties or responsibilities which, in your reasonable judgment, are inconsistent with such status, title(s) or position(s); or the withdrawal from you of any duties or responsibilities which in your reasonable opinion are consistent with such status, title(s) or position(s); or any removal of you from or any failure to reappoint or reelect you to such position(s); or (ii) a reduction by the Company in your base salary in effect immediately prior to the Effective Date: or (iii) the failure by the Company to continue in effect any Plan in which you were participating immediately prior to the Effective Date other than as a result of the normal expiration or amendment of any such Plan in accordance with its terms, or the taking of any action, or the failure to act, by the Company which would adversely affect your continued participation in any such Plan on at least as favorable a basis to you as is the case immediately prior to the Effective Date or which would materially reduce your benefits under any of such Plans or deprive you of any material benefit enjoyed by you immediately prior to the Effective Date, except as proposed by you to the Company; or (iv) the relocation of the principal place of your employment to a location 25 miles further from your principal residence without your express written consent; or (v) the failure by the Company upon a Change of Control to obtain the assumption of this Agreement by any Successor (other than by operation of law); or (vi) any refusal by the Company to continue to allow you to attend to matters or engage in activities not directly related to the business of the Company which you attended to or were engaged in immediately prior to the Effective Date and which do not otherwise violate your obligations hereunder; or (vii) any continuing material default by the Company in the performance of its obligations under this Agreement, whether before or after a Change of Control. "LTIP PLAN" means the Company's Long-Term Incentive Plan adopted as it may be amended, modified, or replaced, up to, but not on or after, an Effective Date. A-3 "OTHER PLANS" means any thrift; bonus or incentive; stock option or stock accumulation; pension; medical, disability, accident or life insurance plan, program or policy of the Company which is intended to benefit employees of the Company that are similarly situated to you (other than the Bonus Plan, Defined Benefit Plan, Defined Contribution Plan, LTIP Plan or Purchase Plan). "PERSON" means any individual, corporation, partnership, group, association or other "person," as such term is used in Sections 13(d) and 14(d) of the Exchange Act, other than the Company or any Plans sponsored by the Company. "PERQUISITES" means individual perquisites benefits received by you immediately prior to the Effective Date, including, but not limited to, club membership dues. "PLANS" means the Bonus Plan, Defined Benefit Plan, Defined Contribution Plan, LTIP Plan, Purchase Plan, Compensation Deferral Plan and Other Plans. "PURCHASE PLAN" means the Company's Employee Stock Purchase Plan adopted as the same shall be amended or modified to, but not on or after, any Effective Date. "RETIREMENT" means termination of your employment on the "normal retirement date" as set forth in the Defined Benefit Plan. "SEVERANCE PACKAGE" means your right to receive, and the Company's obligation to pay and/or perform on, the following: (a) on or within ten days following an applicable Termination Date, the Company shall pay to you a lump sum, cash amount equal to the sum of (i) three times the highest annual rate of Base Salary in effect during the current year or any of the three years preceding the Termination Date and (ii) three times the greater of (A) the maximum award you would have been eligible to receive under the Bonus Plan in respect of the current year, regardless of any limitations otherwise applicable to the Bonus Plan (i.e., the failure to have completed any vesting period or the current measurement period, or the failure to achieve any performance goal applicable to all or any portion of the measurement period) or (B) the largest award earned (whether or not paid) under the Bonus Plan in respect of any of the three years preceding the Termination Date, or (C) 60% of your Base Pay at the applicable Termination Date, and (iii) three times the Black-Scholes value at the time of grant of the most valuable one-year option grant (excluding any option you received at your election in lieu of salary or bonus award) you had received from the Company during the five years prior to your Termination Date with any such Black-Scholes valuation performed on a basis consistent with the methodology set forth on Exhibit A to the Agreement; and (b) in addition to your entitlement to the vested portion of your interest in the Defined Contribution Plan in accordance with the terms of that plan, the Company shall pay to you, on or within ten days following the applicable Termination Date, an amount in cash equal to the unvested portion of the Company's contributions to your account, A-4 which unvested portion shall be valued on the same basis as the Shares contributed by the Company in respect of the unvested portion were valued at the date(s) of contribution; and (c) in addition to any vested retirement benefits to which you are entitled on the Termination Date under the Defined Benefit Plan, the Company shall pay to you, on or within ten days following an applicable Termination Date, an amount in cash equal to the product of (i) a number equal to your years of life expectancy beyond age 65 determined in accordance with the actuarial assumptions utilized under the Defined Benefit Plan immediately prior to the Termination Date, times (ii) an amount equal to the difference between (A) the annual benefit to which you would have been entitled under the "single life annuity" method of distribution under the Defined Benefit Plan if you were fully vested thereunder (without regard to (I) whether you shall actually have completed the period of Vesting Service required to qualify for benefits under the Defined Benefit Plan, (II) any limitation on the amount used in the calculation of the annual benefit thereunder, (III) any offset thereunder for severance allowances payable thereunder, or (IV) any amendment to the Defined Benefit Plan made in connection with a Change of Control and on or prior to the Termination Date, which amendment adversely affects in any manner the computation of retirement benefits under such plan) and had accumulated an additional three years of Vesting Service thereunder, and (B) the annual benefit, if any, to which you would be entitled under the single life annuity method of distribution under the Defined Benefit Plan as of the Termination Date; and (d) unless you give notice to the Company pursuant to the next sentence within 90 days following an applicable Termination Date, the Company shall maintain in full force and effect, at its sole expense for the continued benefit of you and your dependents during the period from the Termination Date through the earlier (i) three years from the Termination Date or (ii) the commencement date of equivalent benefits from a new employer, all insured and self-insured employee welfare benefit Plans and Perquisites in which you were entitled to participate immediately prior to the Termination Date. Alternatively, if you notify the Company that you so elect, the Company shall pay you within five days of such notification an amount in cash equal to three times the average annual cost incurred by the Company during the preceding three calendar years as a result of your participation in such welfare benefit Plans (or such fewer whole calendar years as you have so participated). If your participation in any such welfare benefit Plan is barred, the Company, at its sole cost and expense, shall arrange to have issued for the benefit of you and your dependents individual policies of insurance providing benefits substantially similar (on an after-tax basis) to those which you are entitled to receive under such Plans. You shall not be required to pay any premiums or other charges for such policies. At the end of three years after the Termination Date, the Company, provided you have not previously received or are not then receiving equivalent benefits from a new employer, shall arrange, at its sole cost and expense, to enable you to programs upon the same terms as employees of the Company may apply for such conversions. A-5 Anything else in this Agreement to the contrary notwithstanding, if (i) you are terminated in connection with a merger, consolidation or a tender offer or an exchange offer, (ii) you are entitled to the benefits provided for under Section 1 hereof, and (iii) your Termination Date precedes or occurs on the date of the closing thereof, then unless otherwise agreed to by both parties in writing, all amounts to which you are or shall become entitled to under this Agreement, which are calculable as of the closing date, shall be accelerated to, and become immediately due and payable contemporaneously with such closing. "SHARES" means shares of Common Stock, $.01 par value, of the Company at the date of this Agreement, as the same shall be subsequently amended, modified or changed. The term "market value," when used with respect to a Share means the closing price therefor on the New York Stock Exchange or if not listed thereon, on such other exchange as shall at the tune constitute the principal exchange for trading in Shares. "VOTING SECURITIES" means, with respect to any corporation or business enterprise, those securities, which under ordinary circumstances are entitled to vote for the election of directors or others charged with comparable duties under applicable law. A-6 EX-10.25 3 0003.txt EXECUTIVE SEVERANCE PROGRAM EXHIBIT 10.25 COOPER CAMERON CORPORATION POLICY BULLETIN SUBJECT: EXECUTIVE SEVERANCE PROGRAM Effective July 1, 2000 I. PURPOSE To establish a severance program for senior level executives of the Company that recognizes (i) the relatively more difficult employment transition that occurs upon the termination of employment of higher paid individuals; and (ii) that senior level executive employees, to a greater extent than other salaried employees, serve at the pleasure of the company and are decidedly "at will" - meaning that the Company may terminate the employment relationship at any time for any reason without liability to the employee. II. SCOPE This policy applies to corporate officers, division presidents, management level direct reports to division presidents and such other employees, as may be designated by the Chief Executive Officer of Cooper Cameron Corporation. III. SEVERANCE PAY The covered executive will receive severance pay in the form of salary continuation for a period of twelve (12) months following termination of employment by the Company for reasons other than cause. Payment of this severance benefit is contingent upon signing a full and complete severance waiver and release in a form acceptable to the Company. (Please see attached waiver and release.) IV. BENEFITS CONTINUATION The following benefits will be continued during this twelve (12) month severance period: . Basic Life Insurance . Supplemental Life Insurance . Basic Accidental Death & Dismemberment . Voluntary Accidental Death & Dismemberment . Medical/Dental (The COBRA eligibility period runs concurrently with the severance period.) Eligibility for the continuance of any of these benefits ends when the covered executive becomes eligible for such benefit under a benefit plan offered or sponsored by another employer, except to the extent that the terms of the respective plans offer conversion or portability. No additional vacation shall be earned during the severance period. All other benefits to which the covered executive may have been eligible prior to his/her termination of employment shall cease on the last day of employment. Eligibility for distributions under any Cooper Cameron sponsored retirement plan shall be pursuant to and made in accordance with the provisions of the specific plan. MICP Participation in MICP will be prorated through the last day of employment and determined on the basis of the goals and objectives established for the applicable plan year. No further bonus entitlements will be earned during the severance period. Long-Term Incentive Plan Stock options granted to the executive shall be governed by the terms of the Company's Long-Term Incentive Plan and the specific provisions of the option agreement. As provided in such documents, all vesting of stock options ceases as of the last day of employment. The length of time to exercise any vested option is defined in the individual stock option agreement. Other Provisions In addition to salary and benefit continuations as provided above, outplacement services will be made available. If the division in which the executive is employed is sold, merged or consolidated with another entity or business, any executive who continues employment or is offered continued employment with a new owner of a former Cooper Cameron operation in the same or reasonably comparable position, will not be considered terminated within the meaning of this policy. V. OTHER SEVERANCE RIGHTS To the extent any executive covered under this policy is entitled to receive benefits for severance pursuant to statutory or regulatory requirements or an employment contract or arrangement, the benefits hereunder, which are not intended to duplicate such benefits, shall be reduced automatically to avoid any such duplication. The determination of the reduction is the responsibility of the Plans Administration Committee whose decision will be final and binding on both the Company and the executive. VI. RESPONSIBILITIES The general administration of the executive severance program is the responsibility of the Plans Administration Committee, which has final and binding authority to administer the plan in accordance with its stated terms. The corporate vice-president responsible for human resources shall have overall responsibility to effectuate the terms and conditions of this policy and for the day-to-day administration of this policy. These responsibilities may be delegated to other person or persons including division personnel where appropriate. WAIVER AND RELEASE AND ACCEPTANCE OF EXECUTIVE SEVERANCE BENEFITS In consideration of the Company's agreement to provide me with enhanced severance benefits under its Executive Severance Program - 2000, I hereby waive and release the Company from any and all claims, damages, actions, rights, demands and causes of action of any kind related to my employment or the termination of my employment by the Company, whether known or unknown, arising under any federal or state fair employment or discrimination laws, including but not limited to, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Employee Retirement Income Security Act, the Family Medical Leave Act, the Americans With Disabilities Act, and any applicable state's fair employment statutes. I further waive and release any claims or demands arising under state or local law, including but not limited to, common law claims relating to breach of contract and wrongful discharge and common law tort. This Waiver and Release (also referred to as this "agreement") excludes any claims for medical or income replacement benefits for work-related injuries currently pending or permitted by law and further excludes any pension or unemployment compensation benefits to which I may be otherwise entitled. This agreement does not apply to any rights or claims that may arise after its effective date. I acknowledge that this agreement is not intended to indicate that such claims exist or that, if they do exist, they are meritorious. Rather, it is simply an agreement that, in return for the enhanced severance benefits provided under the executive severance program, any and all potential claims of this nature that I may have against the Company, regardless of whether they actually exist, are expressly settled and waived. By signing this agreement, I agree to be bound by it. Anyone who succeeds to my rights and responsibilities, such as heirs or the executor of my estate, shall also be bound by this agreement. I have signed this agreement voluntarily and without coercion or duress. I understand the final and binding effect of this agreement and agree to each of its terms. I acknowledge that the only promises made to me to sign this agreement are those stated in the Plan. I have been advised to consult with an attorney prior to executing this agreement and I have been given at least twenty-one (21) days to consider this agreement before signing. I understand that I have seven (7) days to revoke, in writing, this agreement which will not become effective or enforceable until this seven (7) day period has expired. I further acknowledge that I have carefully read the Plan and this agreement, understand their terms, and I am voluntarily accepting the Company's offer of additional benefits under that Plan. I understand that the enhanced severance benefits provided under the Plan are valuable consideration to which I would not otherwise be entitled, but are solely in return for the waiver of rights and claims stated in this agreement. In consideration for the benefits provided to me by this agreement, I further agree not to commence any lawsuit or make any claims against the Company for matters covered by this agreement, nor to participate in any such action or claim other than as required by law (except as necessary to protect my rights under this agreement). I represent that, as of the effective date of this agreement, I have not brought or joined any lawsuit or filed any charge or claim against the Company in any court or before any government agency. I agree that if I breach any of my obligations under this agreement, the Company will have the right, at its option, to rescind this agreement, in which event I shall be obligated to return to the Company all amounts paid to me as enhanced severance benefits under the Plan. If I do bring any claim or lawsuit against the Company relating to my employment that has been waived in this agreement, as to any person or entity I sue or bring a claim against in violation of this agreement, I agree to pay all costs and expenses incurred by such person or entity, including reasonable attorney's fees, in defending against such lawsuit. I further agree that the continued entitlement to salary continuation and additional severance benefits is contingent on my not becoming engaged in any employment or other enterprise that involves being in competition with the Company in any of the markets or product lines with which I was involved while employed by the Company and will not, directly or indirectly, participate in the solicitation or recruitment of any Company employees. Should any provision of this agreement be declared invalid by a court of competent jurisdiction, the remaining provisions shall remain in full force and effect, except that the waiver and release portion of this agreement is unenforceable, the entire agreement shall be voidable at the option of the Company, thereby requiring me to return to the Company all payments and benefits given in consideration for the waiver and release. As used in this agreement, the word "Company" shall mean Cooper Cameron Corporation, its unincorporated divisions, wholly-owned subsidiaries, affiliates, successors and assigns, as well as each of their respective agents, employees, officers and directors acting in their individual and/or official capacity. Signed by: ______________________________________________ Printed Name: ______________________________________________ Dated: ______________________________________________ Witnessed by: ______________________________________________ Printed Name: ______________________________________________ Company Representative: ______________________________________________ Title: ______________________________________________ Dated: ______________________________________________ EX-13.1 4 0004.txt PORTIONS OF ANNUAL REPORT EXHIBIT 13.1 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF COOPER CAMERON CORPORATION The following discussion of the Company's historical results of operations and financial condition should be read in conjunction with the Company's consolidated financial statements and notes thereto included elsewhere in this Annual Report. All per share amounts included in this discussion are based on "diluted" shares outstanding. Overview The Company's operations are organized into four separate business segments -- Cameron, Cooper Cameron Valves (CCV), Cooper Energy Services (CES) and Cooper Turbocompressor (CTC). Cameron is a leading international manufacturer of oil and gas pressure control equipment, including wellheads, chokes, blowout preventers and assembled systems for oil and gas drilling, production and transmission used in onshore, offshore and subsea applications. CCV provides a full range of ball valves, gate valves, butterfly valves and accessories to customers across a wide range of the energy industry and industrial market. CES designs, manufactures, markets and services natural gas compression equipment, primarily for the energy industry, and CTC provides centrifugal air compressors and aftermarket products to manufacturing companies and chemical process industries worldwide. The following table sets forth the consolidated percentage relationship to revenues of certain income statement items for the periods presented:
YEARS ENDED DECEMBER 31, - ----------------------------------------------------------------------------------------- 2000 1999 1998 - ----------------------------------------------------------------------------------------- Revenues 100.0% 100.0% 100.0% - ----------------------------------------------------------------------------------------- Costs and expenses: Cost of sales (exclusive of depreciation and amortization) 70.3 73.0 70.8 Depreciation and amortization 5.4 5.7 3.8 Selling and administrative expenses 14.2 13.9 12.2 Interest expense 1.3 1.9 1.7 Nonrecurring/unusual charges 5.6 0.7 1.2 - ----------------------------------------------------------------------------------------- Total costs and expenses 96.8 95.2 89.7 - ----------------------------------------------------------------------------------------- Income before income taxes 3.2 4.8 10.3 Income tax provision (1.2) (1.9) (3.1) - ----------------------------------------------------------------------------------------- Net income 2.0% 2.9% 7.2% =========================================================================================
2000 COMPARED TO 1999 Cooper Cameron Corporation had net income of $27.7 million, or $.50 per share, for the twelve months ended December 31, 2000 compared with $43.0 million, or $.78 per share in 1999. The results for 2000 included after-tax charges of $56.6 million ($77.4 million pre-tax), or $1.03 per share for the cost of exiting a product line and other cost rationalization programs in all four segments. Of these charges, approximately 52% either have required, or will ultimately require, the use of cash, while the remaining 48% reflected write-offs and write-downs of intangible and tangible assets. Further information regarding the types of costs, a breakdown by segment and a breakdown by major project is set forth in Note 2 of the Notes to Consolidated Financial Statements. At December 31, 2000, the Company had balance sheet accruals totaling $13.3 million with respect to the above charges, including remaining accruals for similar expenses incurred in 1999. The Company currently anticipates that all but approximately $2.8 million of these accruals will be paid out during 2001. The remaining balance relates to such items as the carrying costs for facilities being held for sale that may be spread over several additional years. Excluding these nonrecurring/unusual charges, the Company earned $1.53 per share in 2000 compared to $1.00 per share in 1999--an increase of 53%. REVENUES Revenues for 2000 totaled $1.387 billion, reflecting a 6% decline from 1999's total of $1.475 billion. Excluding 1999 revenues of $93.1 million attributable to the CES rotating compressor business that was sold on September 30, 1999, revenues year-to-year were essentially unchanged, with an increase in Cameron offsetting decreases in the other three segments. Revenues for 1999 and prior years have been restated to exclude certain freight costs that are now required to be treated as an element of cost of sales rather than a reduction of revenues. Revenues for Cameron totaled $838.3 million, an increase of 3% from 1999 revenues of $817.1 million. Revenue increases in both subsea and aftermarket products more than offset a fairly significant decline in drilling and a smaller decline in surface products. At the end of 1999, the Company had a fairly significant backlog of larger drilling projects, including control systems that were delivered during 2000 but not replaced with additional large project orders at this stage of the recovery in the markets served by Cameron. Subsea products benefited from deliveries related to a large project offshore in the Philippines, as well as several projects in Equatorial Guinea. As with drilling, however, 2000 did not produce additional large subsea project orders. As a result, while the overall subsea backlog is somewhat higher at the end of 2000 than at the beginning, the proportion of larger versus smaller projects has declined. The small decline in year-over-year revenues from surface products was more a matter of individual markets than an overall trend, with improvements in the Western Hemisphere offset by declines in Europe and, to a lesser degree, Asia Pacific. Overall, the aftermarket products fared best with not only a 17% improvement in revenues but also a 67% improvement in backlog. This result reflected improvements in nearly all geographic areas as customers were repairing and upgrading oilfield equipment in response to higher oil and gas prices. CCV's revenues of $221.1 million declined by 5% from 1999's $233.6 million. Increases in distributor products and aftermarket revenues were more than offset by declines in pipeline valve sales and in Orbit valves, which are sold primarily in industrial applications. Although order activity improved in 2000 compared to 1999, the overall decline in revenues was primarily the result of a higher backlog level, particularly in pipeline valves, at the beginning of 1999 compared to the beginning of 2000. Backlog at the beginning of 2001 is over 30% higher than at the beginning of 2000, but still over 20% below the beginning of 1999. Revenues for CES, excluding the revenues related to the rotating compressor business as noted above, declined by less than 1%. Excluding revenues related to the new unit Superior engine business (in the process of being discontinued), which declined by $6 million year over year, CES's revenues actually increased by nearly 2%. Declines in the Superior separable compressor line, which were negatively affected by the problems in the Superior engine business, as well as start-up issues at a new manufacturing facility near Houston, Texas where these compressors will now be manufactured, were more than offset by a 12% improvement in CES aftermarket revenues. Following the discontinuance of the new unit engine business, nearly 70% of CES revenues in future periods are currently expected to come from aftermarket parts and service. CTC revenues of $102.4 million were down slightly (2%) from 1999's total of $104.7 million. This decline was entirely attributable to a nearly 35% decline in revenues from CTC's highly engineered process air machines that are utilized by air separation companies throughout the world. Revenue growth in plant air machines, as well as improvements in both aftermarket parts and repairs, were nearly sufficient to offset this decline. COST AND EXPENSES While revenues declined by $88.4 million as discussed above, cost of sales (exclusive of depreciation and amortization) decreased by $101.5 million producing $13.1 million of additional margin (a 2.7 percentage point improvement in the gross margin percentage (defined as revenues less cost of sales as a percentage of revenues)). These results are discussed below in more detail for each segment. Cameron's gross margin percentage remained essentially unchanged at approximately 29%. The savings generated by restructuring programs were offset by start-up problems with a new drilling controls system, as well as pricing pressure in both the Asia Pacific and Eastern Hemisphere regions, resulting in net additional margin of $3.9 million. CCV's gross margin percentage improved by nearly 4 percentage points to 32.2% as benefits from earlier restructuring efforts continued, along with a revenue shift from pipeline to distributor products (which normally carry higher margins) and a growth in aftermarket revenues more than offsetting a decline in Orbit, which has the highest overall margin percentage. This improvement resulted in $5.1 million of additional margin. CES's gross margin percentage increased from 18.4% to 27.0% almost entirely as a result of the disposition of the rotating compressor business. Particularly in 1999, this business had a very low gross margin percentage and, after period costs, including an allocation of general overhead expenses, actually operated at a loss. CES's margin improvement was $1.9 million. The decision to exit the Superior new unit engine business should provide further improvements in 2001 and beyond, since this product line was generating virtually no gross margin and operating at a loss after period costs are considered. CTC's gross margin percentage improved by slightly more than three percentage points to 35.8%. This result reflects productivity improvements as well as a focus on controlling the fixed-cost components of cost of sales. Machine tool upgrades over the last several years, as well as a single manufacturing plant environment that permits closer management control, facilitated the improvement. CTC's margin improvement was $2.5 million. Depreciation and amortization expense declined from $83.7 million in 1999 to $75.3 million in 2000. Virtually all of this decline occurred at CES, where fixed assets sold in connection with the sale of the rotating compressor business, as well as those eliminated in various restructurings, more than offset any incremental increase resulting from new capital expenditures. In the other segments, year-to-year expense was essentially flat as depreciation on new additions offset the effect of assets that became fully depreciated. Selling and administrative expense declined by $8.3 million from $205.7 million in 1999 to $197.4 million in 2000. As a percentage of revenues, this expense remained largely unchanged at 14%. From a segment perspective, CES had the largest decline at $7.6 million, or 15.6%, for the same reasons discussed above in connection with depreciation and amortization expense. Cameron also had lower costs ($5.6 million or 5.5%) reflecting the benefits of restructuring efforts and additional pension income from higher returns on pension assets, while CCV, CTC and Corporate all had small increases primarily related to sales and marketing initiatives. Reflecting the various factors discussed above, operating income (defined as earnings before the 1999 gain on sale, nonrecurring/unusual charges, corporate expenses, interest and taxes) totaled $155.0 million, or an improvement of $32.0 million over 1999's $123.0 million. Cameron increased from $94.9 million to $103.0 million, CCV increased from $20.4 million to $25.7 million, CES increased from a loss of $(8.5) million to income of $8.8 million and CTC increased from $16.2 million to $17.5 million. Interest expense declined from $27.8 million in 1999 to $18.0 million in 2000. This decline was almost entirely attributable to approximately $200 million of cash received on September 30, 1999 in connection with the sale of the CES rotating compressor business. The tax rate for 2000 was 36.8%, reflecting the combination of a full-year rate on operational earnings, including nonrecurring/unusual charges, of 30.5% and the absence of a tax deduction on $9.1 million of translation component write-offs (included in nonrecurring) that are not deductible for tax purposes. The 30.5% compares with 32.9% in 1999 and is lower primarily because the proportion of foreign income in certain lower tax rate locations such as Singapore and Ireland was higher in 2000 than in 1999. 1999 COMPARED TO 1998 Cooper Cameron Corporation had net income of $43.0 million, or $.78 per share, for the twelve months ended December 31, 1999. This compares to $136.2 million, or $2.48 per share, for the same period in 1998. Included in the 1999 results were after-tax charges of $37.5 million ($55.9 million pre-tax), or $.69 per share, for cost rationalization in all four segments. These charges included non-cash asset write-downs, severance costs for staff reductions and $9.2 million in pre-tax charges related to various cost reduction programs initiated during 1998. Providing a partial offset to nonrecurring expense was a preliminary after-tax gain of $25.8 million ($45.3 million pre-tax), or $.47 per share, on the sale of the CES rotating compressor business to Rolls-Royce plc for approximately $200 million in cash. Included in the 1998 results were $15.5 million, or $.28 per share, in after- tax nonrecurring/unusual charges ($22.0 million pre-tax), primarily for severance costs in all four segments. See Note 2 of the Notes to Consolidated Financial Statements for further information regarding the nonrecurring/unusual charges recorded in both 1999 and 1998. Excluding these nonrecurring/unusual charges, the Company earned $1.00 per share in 1999 compared to $2.76 per share in 1998. REVENUES Revenues for 1999 totaled $1.475 billion, a decrease of 22% from the $1.893 billion in 1998, with declines in all four segments. Revenues for Cameron totaled $817.1 million, a decrease of 20% from 1998 revenues of $1.025 billion. Revenues decreased in surface and subsea products, while drilling product revenues increased. Drilling product revenues were heavily influenced by long lead-time major project orders booked during 1998, while subsea products suffered from the lack of major projects in the Gulf of Mexico and North Sea. Surface products, which have a shorter delivery cycle and respond more quickly to changes in orders, reflected the low levels of activity in this market during 1999. Revenues for Cameron Controls, Cameron Willis, and aftermarket are included in drilling, surface, and subsea product categories. On a geographical basis, revenues decreased in all regions. The Western Hemisphere declined primarily due to weak surface product activity related to the generally sluggish market conditions in the U.S., Canada, and Latin America. The Eastern Hemisphere decreased primarily due to the weak activity in the North Sea, while Asia Pacific declined due to delayed gas development projects throughout the region. CCV's revenues of $233.6 million declined by 25% from the $311.8 million in 1998. The weakness was across all products and markets, including oilfield distributor products, where customers worked off excess inventories during 1999, and in pipeline valves, where major projects were delayed. Additionally, Orbit Valve International, Inc. (Orbit Valve) products declined, due to a lack of major upgrade or new chemical plant projects, in spite of an extra quarter of revenues in 1999 (the business was acquired April 2, 1998). Revenues for CES of $319.7 million declined by 24% from the $422.5 million in 1998. The market served by this segment remained very competitive during 1999, with industry-wide overcapacity. Virtually all of the revenue decline was in the rotating compressor business, which was sold to Rolls-Royce plc on September 30, 1999. Through the sale date, this portion of the business had revenues of $93.1 million, compared to $188.1 million for all of 1998. The ongoing reciprocating products business declined by 3% from 1998 to 1999 due to generally stagnant market conditions. CTC had revenues of $104.7 million, or a decrease of 22%, from $134.3 million in 1998, with declines across all lines of the business. The most significant decline was in process air machines, where large air separation customers delayed placing new orders during 1999. The overall low level of products sold directly to Southeast Asian markets was the primary factor in the plant air machine market during the year. This continuing weakness in the Asian markets also caused industrial development projects in other parts of the world to be pushed out and, when undertaken, to be more price competitive. COST AND EXPENSES The $418.3 million revenue decrease discussed above resulted in a $264.4 million decrease in cost of sales (exclusive of depreciation and amortization) and a resulting gross margin shortfall of $153.9 million. Because short-term cost control measures were not able to keep pace with the revenue decline, as well as changes in sales mix, the gross margin percentage (defined as revenues less cost of sales as a percentage of revenues) declined by 2.2 percentage points. This result is discussed below in more detail for each segment. Cameron's gross margin percentage was 29.4% in 1999, compared to 32.6% in 1998. The decline resulted from an increase in relatively lower-margin drilling product revenues combined with a decrease in higher-margin surface and subsea products. Additionally, pricing pressure, which began to increase in late 1998, continued during 1999, although the effect on 1999 results was somewhat mitigated by shipments from backlog at favorable pricing levels. Providing a partial offset were the benefits of various ongoing cost reductions, including foreign sourcing of material, staffing reductions, and capital expenditures for new higher-efficiency machine tools. CCV's gross margin percentage decreased from 31.2% in 1998 to 28.3% in 1999. The decline was caused by increased pricing pressure, as competitors fought to retain share in the severely depressed markets, and manufacturing period cost reductions which were unable to keep pace, in the near term, with the rapid decline in revenues. The gross margin percentage for CES improved from 18.2% in 1998 to 18.4% in 1999. This slight improvement was the result of the decrease in the lower- margin rotating compressor business revenues, partially offset by pricing pressure throughout the business and cost reductions that could not keep pace with the revenue decline. CTC's gross margin percentage declined from 33.1% in 1998 to 32.6% in 1999. The decline resulted from pricing pressure in all product lines, but particularly in process air machines. Depreciation and amortization expense increased by $11.2 million, from $72.5 million in 1998 to $83.7 million in 1999. This increase was due mainly to capital spending during 1998 and 1999, primarily in Cameron. Selling and administrative expenses decreased by $24.0 million, or 10%, from $229.7 million in 1998 to $205.7 million in 1999. Cameron decreased by $18.3 million due to cost reductions in response to revenue declines. CCV declined by $3.7 million as the additional quarter of Orbit Valve was more than offset by cost reductions in the remainder of the business. CES decreased by $3.6 million due to the sale of the rotating compressor business on September 30, 1999 and cost reductions in the reciprocating business. Despite the Company's efforts to reduce costs in this area, selling and administrative expense as a percentage of revenue increased from 12.2% in 1998 to 13.9% in 1999. Reflecting the various factors discussed above, operating income (defined as earnings before the gain on sale, nonrecurring/unusual charges, corporate expenses, interest and taxes) totaled $123.0 million, a decrease of $138.8 million from 1998. Cameron decreased from $180.2 million to $94.9 million, CCV declined from $48.4 million to $20.4 million, CES decreased from $6.8 million to a loss of $(8.5) million, and CTC declined from $26.4 million to $16.2 million. Interest expense was $27.8 million in 1999, a decrease of $4.9 million from 1998. This decline was due to a lower average debt level, primarily from working capital reductions and the proceeds from the sale of the rotating compressor business. The tax rate for 1999 was 39.4%, reflecting the combination of a 43.0% tax rate on the gain on sale, combined with a full year rate on operational earnings, including nonrecurring expenses, of 32.9%. The 32.9% rate compares to a 1998 rate of 30.4%, and is higher primarily due to a change in the mix of domestic and foreign earnings. OUTLOOK FOR 2001 The Company currently expects its 2001 earnings per share, excluding charges, to total approximately $1.90 to $2.00, and first quarter earnings to be essentially the same as the first quarter of 2000, or approximately $.30 per share. Earnings in the remaining quarters of 2001 are expected to show sequential increases, with 60 to 70 percent of the year's earnings generated in the second half. A major factor contributing to this expectation is the timing of awards for large-scale subsea projects. During 2000, awards continued to be delayed such that the estimated 2001 results do not include any earnings contribution from the large-scale subsea project bids that Cameron currently has outstanding. Any projects ultimately awarded during 2001 are unlikely to generate meaningful revenues and earnings until 2002, given the time from order receipt to product delivery typically involved in such projects. In connection with the decision to exit the Superior new unit engine business, the Company currently expects that it may incur $20 to $25 million of additional cash expense, including operating costs, during the shutdown that is expected to be largely completed during the first half of 2001. These charges are excluded from the earnings estimates set forth above. PRICING AND VOLUME The Company believes that the year-to-year revenue changes reflect, on an overall basis, a 2000 price decrease in CCV, a slight decrease in Cameron and flat pricing for the other two segments; 1999 price decreases in all four segments due to weak market conditions and pricing pressure; and 1998 price increases in Cameron and CCV, while CES and CTC had price decreases. Correspondingly, 2000 sales volumes were up in Cameron and down for the remaining three segments; 1999 sales volumes were down in all four segments; and 1998 sales volumes were up in Cameron and CCV but down in CES and CTC. Excluding the effect of the Orbit Valve acquisition on sales volumes, CCV would have had a decline in 1998. Cameron initiated some price increases in the latter part of 2000 that may contribute to an increase in revenues in 2001. LIQUIDITY AND CAPITAL RESOURCES During 2000, total indebtedness decreased by approximately $18 million or 8.6% to $192.3 million--the lowest total indebtedness amount in the Company's 5 1/2-year history. This decrease resulted almost entirely from operating cash flows as the significant cash inflow ($62 million) resulting from employee purchases of stock through option exercises and other miscellaneous cash flows offset the $67 million utilized for capital expenditures and an $8 million increase in the Company's available cash balance. The Company's debt-to-capitalization ratio at year-end 2000 was 18.6%, compared to 22.8% at year end 1999, also a record low. During 1999, total indebtedness decreased by nearly 50% to $210.3 million at year-end compared to $414.0 million at December 31, 1998. This decrease was largely attributable to the $203.2 million of cash received at the end of the third quarter in connection with the sale of the rotating compressor business. During 1998, total indebtedness increased by $37.0 million from 1997. The combination of strong earnings and improved working capital management during 1998 largely offset over $207 million of cash utilized for capital expenditures and acquisitions, in addition to over $20 million of debt assumed in the Orbit acquisition, as well as $36 million of cash used to repurchase Company stock early in the year. In addition to uncommitted amounts available under various other borrowing arrangements, the Company had $304.5 million of committed borrowing capacity available at December 31, 2000. There are also several other significant items that should be considered in evaluating the Company's overall liquidity. At December 31, 2000, the Company's defined benefit pension plans were overfunded by $82.2 million ($85.8 million at December 31, 1999). In addition to providing pension income rather than pension expense over the last three years, those overfunded plans have aided the Company's liquidity by minimizing the necessity to make pension contributions. In addition, at December 31, 2000, the Company had $85.6 million of U.S. federal income tax loss carry-forwards that were primarily attributable to a deduction which the Company received when employees were required to pay tax on the gain from stock option exercises. The magnitude of this asset is such that the Company does not currently anticipate paying essentially any U.S. federal income tax during 2001 and through most of 2002. In connection with a "shelf" registration statement filed during May 1998, the Company entered into treasury locks, or forward rate agreements, which locked in a weighted average interest rate of 5.83% on $175 million of a prospective long- term debt issuance. During March 1999, the Company entered into interest rate swaps with various financial institutions, effectively converting $175 million of outstanding floating rate debt to fixed rate debt at a weighted average interest rate of 6.46%. This transaction replaced the existing treasury locks, or forward rate agreements. The Company paid $8.2 million to the counterparties to the treasury locks in connection with the termination of these agreements. In December 1999, the Company terminated the interest rate swaps, receiving $11.2 million from the counterparties to these agreements. Of the net $3 million gain, $0.9 million was recognized in the fourth quarter of 1999 and the remainder is being amortized to interest expense over the remaining 10-year life of the interest rate swaps. During January 2001, the Company entered into interest rate swaps which effectively converted $155 million of outstanding floating rate debt to fixed rate debt at a weighted average interest rate of 5.24%. The majority of these swaps extend through March 2002. The Company's liquidity can be susceptible to fairly large swings in relatively short periods of time. This is largely because of the cyclical nature of the industry in which the Company competes and the long time period from when the Company first receives a large equipment order until the product can be manufactured, delivered, and the receivable collected. WORKING CAPITAL Operating working capital is defined as receivables and inventories less accounts payable and accrued liabilities, excluding the effect of foreign currency translation, acquisitions and divestitures. During 2000, operating working capital increased by $44.9 million, with a decrease in inventories being more than offset by an increase in accounts receivable and a decrease in accounts payable and accrued liabilities. The $17.0 million inventory decrease and the $11.6 million receivable increase reflect normal operating activities as the Company's business grew modestly during 2000. The $50.4 million decrease in accounts payable and accrued liabilities occurred primarily in Cameron and is primarily attributable to a decrease in the amount of customer advances (classified as an accrued liability) as most of the larger drilling projects have been completed and not replaced with either new drilling or subsea projects. During 1999, operating working capital decreased $91.8 million. Receivables decreased by $40 million, primarily in Cameron and CCV, due to a combined 22% decline in revenues. Inventories decreased by $72 million, with declines in Cameron, CCV, and CTC, and an increase in CES. The declines were related to the weak markets and the resulting decrease in production requirements, as well as a continuing focus on inventory reduction programs. The increase in CES resulted from a higher year-end 1999 backlog level in reciprocating products. Accounts payable and accrued liabilities decreased $21 million, reflecting the lower business levels and a decline in cash advances and progress payments received from customers as major project orders in Cameron's backlog declined. During 1998, operating working capital decreased $13.9 million. This result was comprised of a $58 million increase during the first nine months of 1998 followed by a fourth quarter decline of $71.9 million. Of the fourth quarter decline, approximately $44 million came from receivables and $43 million from inventories, partially offset by lower accounts payable and accrued liabilities of approximately $15 million. The receivable and inventory declines reflected some initial slowing of activity and, for receivables, unusually strong fourth quarter collections. On a year-to-year basis, receivables declined by nearly $80 million, including a nearly $24 million decline in receivables recognized by CES under the percentage of completion method, which reflected the completion of large gas turbine and compressor projects. Despite the fourth quarter decrease, inventories increased on a year-to-year basis by $23 million, with small declines in Cameron and CCV (excluding Orbit) offset by an increase at CES and CTC. While the declines reflected normal operating activity, the increase at CES resulted from a decision to maintain production levels despite delays in the receipt of anticipated orders. This decision was, to a large degree, validated by the receipt in late 1998 and early in 1999 of nearly $57 million of gas turbine and compressor project business. The $42 million year-to-year decrease in accounts payable and accrued liabilities reflected a decline in inventory purchases as well as the lower overall year-end 1998 business levels, partially offset by an increase in cash advances and progress payments received from customers on major project orders in Cameron's backlog. CASH FLOWS During 2000, cash flows from operating activities totaled $20.2 million, a decrease of $119.7 million or 86% from the prior year level. This result was largely attributable to the combined effect of a $44.9 million increase in working capital in 2000 combined with the prior year's $91.8 million decrease, partially offset by a number of other small year-to-year changes. The cash flow from operating activities, combined with $79.3 million from stock plan activity, positive net cash flow from divestitures less acquisitions and other items, was sufficient to cover $66.6 million of capital expenditures, an $8.4 million increase in available cash and a reduction in total indebtedness of $18 million. During 1999, cash flows from operating activities totaled $139.9 million, a decline of $95.7 million or 41% from the prior year level. This decline was primarily attributable to a $93.2 million decrease in net income for the year. The cash flow from operations, along with the proceeds from the sale of the rotating compressor business totaling $203.2 million and $9.3 million from the sale of plant and equipment, was utilized primarily to pay down outstanding debt of approximately $196.2 million, fund capital expenditures totaling $64.9 million and allow for the mid-December acquisition of $92.3 million (approximately 3.5 million shares) of common stock under forward purchase agreements with two financial institutions. Other uses of cash included the acquisition during the fourth quarter of the remaining interest in a joint venture located in Venezuela in which the Company previously held a 49% equity interest. During 1998, cash flows from operating activities totaled $235.6 million, more than twice the level of the previous year. This cash flow, along with net proceeds from sales of plant and equipment of $7.4 million, stock option exercises and other activities of $3.4 million and additional borrowings of $15.7 million, was utilized to fund capital spending of $115.5 million, the cash cost of acquisitions totaling $99.4 million and repurchases of Company stock totaling $36.1 million. The Company's available cash balance also increased by nearly $10 million. The $119.9 million increase in cash flow from operating activities compared to the prior year was virtually all due to working capital changes, predominantly at Cameron and CES. The decline in working capital requirements in 1998 is discussed in the Working Capital section immediately above. With regard to capital spending, nearly 60% of total expenditures in 2000 and 1999 and over two-thirds in 1998 were attributable to Cameron, primarily for projects to increase factory throughput and improve delivery times. CAPITAL EXPENDITURES AND COMMITMENTS Capital projects to reduce product costs, improve product quality, increase manufacturing efficiency and operating flexibility, or enhance production capacity resulted in expenditures of $66.6 million in 2000 compared to $64.9 million in 1999 and $115.5 million in 1998. Planned expenditures for new capital projects during 2001 amount to approximately $108.6 million. These internal commitments include approximately $38.6 million for a new Cameron headquarters building, $31.5 million for machinery and equipment modernization and enhancement, $13.5 million for capacity enhancement, $9.3 million for various computer hardware and software projects, and $15.7 million for other items. Expenditures in 2000 and planned spending for 2001 are focused on generating near-term returns by reducing costs, increasing factory throughput, and improving delivery times for customers. EVALUATION OF GOODWILL REALIZATION Of the Company's $250.4 million of net goodwill at December 31, 2000, the majority relates to acquisitions made by its former parent, Cooper Industries, Inc., prior to the mid-1995 split-off of Cooper Cameron as a separate public company. These acquisitions included various businesses which were incorporated into the CES organization, the Joy Industrial Compressor Group, which became the predominant part of the CTC division and, most significantly, the 1989 acquisition of Cameron Iron Works (now the Cameron division). At the time of the Company's split-off from Cooper Industries, the goodwill related to Cameron was written down by $441 million. Subsequent to the split-off, the Company's primary acquisitions have included the 1996 purchase of Ingram Cactus Company (incorporated into Cameron's operations) and the CCV purchase of Orbit Valve International, Inc. in 1998. Cameron, CCV and CES have also made various smaller product line acquisitions over the last five and one-half years which have added to the Company's goodwill. In most cases, the Company has determined 40 years to be an appropriate period for amortizing goodwill from the respective acquisition dates due to the long-lived nature of the businesses acquired and the lack of rapid technological change or obsolescence associated with these operations. As discussed above, during 2000, operating income (which excludes nonrecurring/unusual charges and certain other items) increased by $32 million to $155 million and is currently expected to increase further during 2001. As a result, at this time, the Company has no reason to believe that future cash flows from these operations will not be sufficient to fully realize the remaining carrying value of its goodwill. ENVIRONMENTAL REMEDIATION The cost of environmental remediation and compliance has not been an item of material expense for the Company during any of the periods presented. Cooper Cameron has been identified as a potentially responsible party with respect to five sites designated for cleanup under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA") or similar state laws. The Company's involvement at four of the sites is at a de minimis level. The fifth site is Osborne, Pennsylvania (a landfill into which the CES business operating in Grove City, Pennsylvania had disposed of waste), where remediation is complete and remaining costs (less than $1 million) relate to ongoing ground water treatment and monitoring. The Company believes, based on its review and other factors, that the estimated costs related to these sites will not have a material adverse effect on the Company's results of operations, financial condition or liquidity. However, no assurance can be given that the actual cost will not exceed the estimates of the cleanup costs, once determined. MARKET RISK INFORMATION A large portion of the Company's operations consist of manufacturing and sales activities in foreign jurisdictions, principally in Europe, Canada, Latin America and the Pacific Rim. As a result, the Company's financial performance may be affected by changes in foreign currency exchange rates or weak economic conditions in these markets. Overall, the Company generally is a net receiver of Pounds Sterling and Canadian dollars and, therefore, benefits from a weaker U.S. dollar with respect to these currencies. Typically, the Company is a net payer of euros (including related legacy currencies) and Norwegian krone as well as other currencies such as the Singapore dollar and the Brazilian real. A weaker U.S. dollar with respect to these currencies may have an adverse effect on the Company. For each of the last three years, the Company's gain or loss from foreign currency-denominated transactions has not been material. In order to mitigate the effect of exchange rate changes, the Company will often structure sales contracts to provide for collections from customers in U.S. dollars. In certain specific instances, the Company may enter into forward foreign currency exchange contracts to hedge specific, large, non-U.S. dollar anticipated receipts or large anticipated receipts in currencies for which the Company does not traditionally have fully offsetting local currency expenditures. During 2000, the Company was a party mainly to forward foreign currency exchange contracts related to certain large European, including the U.K., currency receipts. The Company's interest expense is most sensitive to changes in the general level of U.S. interest rates, particularly in regard to debt instruments with rates pegged to the London Interbank Offered Rate (LIBOR). As a result, the Company was a party to interest rate swaps, which effectively fixed the LIBOR component of its borrowing cost on a total of $250 million, through mid-December of 1999, and $75 million, through mid-year 2000, of outstanding indebtedness. The Company had no financial instruments with exposure to market rate changes at December 31, 2000 or 1999. The following is a summary of the Company's outstanding financial instruments with exposure to changes in interest rates and exchange rates:
Interest Exchange Rate Rate (dollars in millions) Sensitive Sensitive - ---------------------------------------------------------------------------------------------- As of December 31, 2000: - ------------------------ U.S. dollar variable rate debt, due 2002 $165.0 Average interest rate 6.8% Fair value difference $ -- U.S. dollar fixed rate debt/1/ $ 10.5 Average interest rate 6.1% Fair value difference $ -- Other (primarily Canadian dollar and British pound) variable rate debt, due 2002 $ 9.5 $ 9.5 Average interest rate 8.6% 8.6% Fair value difference $ -- $ -- Forward contracts to buy/sell foreign currencies (due 2001): Buy Norwegian krone $ 2.0 Average U.S. dollar to Norwegian krone contract rate 8.86 12/31/00 U.S. dollar to Norwegian krone exchange rate 8.80 Fair value difference $ -- Buy British pounds $14.8 Average British pound to U.S. dollar contract rate 1.48 12/31/00 British pound to U.S. dollar exchange rate 1.49 Fair value difference $ 0.2 Buy other currencies (primarily Australian dollars) $ 2.5 Fair value difference $ --
Interest Exchange Rate Rate (dollars in millions) Sensitive Sensitive - --------------------------------------------------------------------------------------------- As of December 31, 1999: - ------------------------ U.S. dollar variable rate debt, due 2002 $167.3 Average interest rate 6.7% Fair value difference $ -- U.S. dollar fixed rate debt/2/ $ 20.5 Average interest rate 6.1% Fair value difference $ -- Other (primarily Canadian dollar) variable rate debt, due 2002 $ 12.6 $12.6 Average interest rate 6.9% 6.9% Fair value difference $ -- $ -- Interest rate swaps -- pay fixed/receive variable notional amount, due 2000 $ 75.0 Average fixed pay rate 5.77% Average receive rate (LIBOR) 6.00% Fair value difference $ 0.2 Forward contracts to buy/sell foreign currencies (due 2000): Buy euros, net $ 2.8 Average euro to U.S. dollar contract rate 1.01 12/31/99 euro to U.S. dollar exchange rate 1.01 Fair value difference $ -- Buy British pounds $51.9 Average British pound to U.S. dollar contract rate 1.61 12/31/99 British pound to U.S. dollar exchange rate 1.62 Fair value difference $ 0.3 Buy other currencies (primarily Norwegian krone) $10.4 Fair value difference $ --
/1/ Includes $350,000 at 6.0% due 2001. The remaining balance is due in 2002. /2/ Includes $10.0 million at 6.0% due 2000. The remaining balance is due in 2002. OTHER In addition to the historical data contained herein, this Annual Report, including the information set forth above in the Company's Management's Discussion and Analysis and elsewhere in this report, includes forward-looking statements regarding the future revenues and earnings of the Company, future savings from nonrecurring actions taken to date, as well as expectations regarding backlog, orders, cash flows and future levels of capital spending made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company's actual results may differ materially from those described in forward-looking statements. Such statements are based on current expectations of the Company's performance and are subject to a variety of factors, not under the control of the Company, which can affect the Company's results of operations, liquidity or financial condition. Such factors may include overall demand for, and pricing of, the Company's products; the size and timing of orders; changes in the price of (and demand for) oil and gas in both domestic and international markets; political and social issues affecting the countries in which the Company does business; fluctuations in currency markets worldwide; and variations in global economic activity. In particular, current and projected oil and gas prices directly affect customers' spending levels and their related purchases of the Company's products and services. Additionally, changes in oil and gas price expectations may impact the Company's financial results due to decisions it may make regarding changes in cost structure, staffing or spending levels. Because the information herein is based solely on data currently available, it is subject to change as a result of changes in conditions over which the Company has no control or influence, and should not therefore be viewed as assurance regarding the Company's future performance. Additionally, the Company is not obligated to make public indication of such changes unless required under applicable disclosure rules and regulations. REPORT OF INDEPENDENT AUDITORS TO THE BOARD OF DIRECTORS AND STOCKHOLDERS COOPER CAMERON CORPORATION We have audited the accompanying consolidated balance sheets of Cooper Cameron Corporation as of December 31, 2000 and 1999 and the related statements of consolidated results of operations, consolidated changes in stockholders' equity and consolidated cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cooper Cameron Corporation at December 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. ERNST & YOUNG LLP Houston, Texas January 30, 2001 CONSOLIDATED RESULTS OF OPERATIONS (dollars in thousands, except per share data)
YEARS ENDED DECEMBER 31, - -------------------------------------------------------------------------------------- 2000 1999 1998 - -------------------------------------------------------------------------------------- Revenues/1/ $1,386,709 $1,475,061 $1,893,311 - -------------------------------------------------------------------------------------- Costs and expenses: Cost of sales (exclusive of depreciation and amortization)/1/ 974,797 1,076,276 1,340,722 Depreciation and amortization 75,321 83,716 72,474 Selling and administrative expenses 197,381 205,734 229,710 Interest expense 18,038 27,834 32,721 Nonrecurring/unusual charges 77,399 10,585 21,956 - -------------------------------------------------------------------------------------- 1,342,936 1,404,145 1,697,583 - -------------------------------------------------------------------------------------- Income before income taxes 43,773 70,916 195,728 Income tax provision (16,113) (27,914) (59,572) - -------------------------------------------------------------------------------------- Net income $ 27,660 $ 43,002 $ 136,156 - -------------------------------------------------------------------------------------- Earnings per share: Basic $ .52 $ .81 $ 2.58 Diluted $ .50 $ .78 $ 2.48 - --------------------------------------------------------------------------------------
/1/ Revised to include shipping and handling costs as an item in cost of sales rather than a reduction in revenues. The Notes to Consolidated Financial Statements are an integral part of these statements. CONSOLIDATED BALANCE SHEETS (dollars in thousands, except shares and per share data)
DECEMBER 31, - ------------------------------------------------------------------------------------------------------- 2000 1999 - ------------------------------------------------------------------------------------------------------- ASSETS Cash and cash equivalents $ 16,566 $ 8,215 Receivables, net 268,768 271,511 Inventories, net 372,740 400,038 Other 29,912 24,809 - ------------------------------------------------------------------------------------------------------- Total current assets 687,986 704,573 - ------------------------------------------------------------------------------------------------------- Plant and equipment, at cost less accumulated depreciation 403,220 419,613 Intangibles, less accumulated amortization 261,600 280,954 Other assets 141,067 65,579 - ------------------------------------------------------------------------------------------------------- Total assets $1,493,873 $1,470,719 - ------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current maturities of long-term debt $ 4,212 $ 14,472 Accounts payable and accrued liabilities 325,004 394,971 Accrued income taxes 16,815 12,383 - ------------------------------------------------------------------------------------------------------- Total current liabilities 346,031 421,826 - ------------------------------------------------------------------------------------------------------- Long-term debt 188,060 195,860 Postretirement benefits other than pensions 48,573 60,823 Deferred income taxes 38,453 38,931 Other long-term liabilities 30,477 39,201 - ------------------------------------------------------------------------------------------------------- Total liabilities 651,594 756,641 - ------------------------------------------------------------------------------------------------------- Stockholders' equity: Common stock, par value $.01 per share, 150,000,000 shares authorized, 54,011,929 shares issued (54,001,507 at December 31, 1999) 540 540 Preferred stock, par value $.01 per share, 10,000,000 shares authorized, no shares issued or outstanding -- -- Capital in excess of par value 929,511 899,978 Accumulated other elements of comprehensive income (37,105) (12,039) Retained deficit (50,667) (78,327) Less: Treasury stock - 3,433,548 shares at cost at December 31, 1999 -- (96,074) - ------------------------------------------------------------------------------------------------------- Total stockholders' equity 842,279 714,078 - ------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $1,493,873 $1,470,719 - -------------------------------------------------------------------------------------------------------
The Notes to Consolidated Financial Statements are an integral part of these statements. CONSOLIDATED CASH FLOWS (dollars in thousands)
YEARS ENDED DECEMBER 31, - ------------------------------------------------------------------------------------------------------------- 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net income $ 27,660 $ 43,002 $ 136,156 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 59,797 64,395 54,735 Amortization 15,524 19,321 17,739 Deferred income taxes and other 739 (10,688) 6,037 Changes in assets and liabilities, net of translation and effects of acquisitions, dispositions and non-cash items: Receivables (11,562) 40,319 79,574 Inventories 17,009 72,402 (23,517) Accounts payable and accrued liabilities (50,394) (20,872) (42,147) Other assets and liabilities, net (38,587) (42,169) 7,031 - ------------------------------------------------------------------------------------------------------------- Change in assets and liabilities (83,534) 49,680 20,941 - ------------------------------------------------------------------------------------------------------------- Exclude nonoperating gain from sale of rotating business, net of tax -- (25,788) -- - ------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 20,186 139,922 235,608 - ------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Capital expenditures (66,599) (64,909) (115,469) Proceeds from sale of rotating business -- 203,160 -- Other dispositions (acquisitions), net 8,171 (7,540) (99,353) Other 15,703 9,256 7,392 - ------------------------------------------------------------------------------------------------------------- Net cash provided by (used for) investing activities (42,725) 139,967 (207,430) - ------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Loan borrowings (repayments), net (17,830) (196,232) 15,743 Activity under stock option plans and other 55,446 (4,802) 3,432 Purchase of treasury stock -- (92,332) (36,050) - ------------------------------------------------------------------------------------------------------------- Net cash provided by (used for) financing activities 37,616 (293,366) (16,875) - ------------------------------------------------------------------------------------------------------------- Effect of translation on cash (6,726) 396 (1,606) - ------------------------------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents 8,351 (13,081) 9,697 - ------------------------------------------------------------------------------------------------------------- Cash and cash equivalents, beginning of year 8,215 21,296 11,599 - ------------------------------------------------------------------------------------------------------------- Cash and cash equivalents, end of year $ 16,566 $ 8,215 $ 21,296 - -------------------------------------------------------------------------------------------------------------
The Notes to Consolidated Financial Statements are an integral part of these statements.
CONSOLIDATED CHANGES IN STOCKHOLDERS' EQUITY (dollars in thousands) ACCUMULATED OTHER CAPITAL IN ELEMENTS OF COMMON EXCESS OF COMPREHENSIVE COMPREHENSIVE RETAINED TREASURY STOCK PAR VALUE INCOME INCOME DEFICIT STOCK - ------------------------------------------------------------------------------------------------------------------------------------ Balance - December 31, 1997 $ 532 $922,975 $ 7,799 $(257,485) $(31,770) Net income $136,156 136,156 -------- Other comprehensive income: Foreign currency translation 9,736 Minimum pension liability, net of $49 in taxes (80) -------- Total other comprehensive income 9,656 9,656 -------- Comprehensive income $145,812 ======== Purchase of treasury stock (36,050) Common stock issued under stock option and other employee benefit plans 1 (53,305) 67,820 Tax benefit of employee stock benefit plan transactions 15,223 Cost of forward stock purchase agreements (1,267) - ------------------------------------------------------------------------------------------------------------------------------------ Balance - December 31, 1998 533 883,626 17,455 (121,329) -- Net income $ 43,002 43,002 -------- Other comprehensive income (loss): Foreign currency translation (29,479) Minimum pension liability, net of $63 in taxes (15) -------- Total other comprehensive income (loss) (29,494) (29,494) -------- Comprehensive income $ 13,508 ======== Purchase of treasury stock 1,267 (98,378) Common stock issued under stock option and other employee benefit plans 7 9,392 2,304 Tax benefit of employee stock benefit plan transactions 5,693 - ------------------------------------------------------------------------------------------------------------------------------------ Balance - December 31, 1999 540 899,978 (12,039) (78,327) (96,074) Net income $ 27,660 27,660 -------- Other comprehensive income (loss): Foreign currency translation (25,313) Other 247 -------- Total other comprehensive income (loss) (25,066) (25,066) -------- Comprehensive income $ 2,594 ======== Common stock issued under stock option and other employee benefit plans (30,091) 96,074 Tax benefit of employee stock benefit plan transactions 59,624 - ------------------------------------------------------------------------------------------------------------------------------------ Balance - December 31, 2000 $ 540 $929,511 $(37,105) $ (50,667) $ -- - ------------------------------------------------------------------------------------------------------------------------------------
The Notes to Consolidated Financial Statements are an integral part of these statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: SUMMARY OF MAJOR ACCOUNTING POLICIES Principles of Consolidation -- The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. Investments of 50% or less in affiliated companies are accounted for using the equity method. The Company's operations are organized into four separate business segments or divisions, each with a President who reports to the Company's Chairman and Chief Executive Officer. The four segments are Cameron, Cooper Cameron Valves (CCV), Cooper Energy Services (CES) and Cooper Turbocompressor (CTC). Additional information regarding each segment may be found in Note 13 of the Notes to Consolidated Financial Statements. Estimates in Financial Statements -- The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Revenue Recognition -- Revenue is recognized in accordance with invoice or contractual terms at the time of shipment or the performance of services except in the case of certain larger, long lead time orders at Cooper Energy Services which, prior to the sale of the rotating business in September 1999, were accounted for using the percentage of completion method. Under this method, revenue was recognized as work progressed in the ratio that costs incurred bore to estimated total costs. The aggregate of costs incurred reduced net inventories while the revenue recognized was shown as a receivable. Inventories -- Inventories are carried at cost or, if lower, net realizable value. On the basis of current costs, 71% of inventories in 2000 and 68% in 1999 are carried on the last-in, first-out (LIFO) method. The remaining inventories, which are located outside the United States, are carried on the first-in, first-out (FIFO) method. Plant and Equipment -- Depreciation is provided over the estimated useful lives of the related assets, or in the case of assets under capital leases, over the related lease term, if less, using primarily the straight-line method. This method is applied to group asset accounts which in general have the following lives: buildings - 10 to 40 years; machinery and equipment - 3 to 18 years; and tooling, dies, patterns and all other - 5 to 10 years. Intangibles -- Intangibles consist primarily of goodwill related to purchase acquisitions. With minor exceptions, the goodwill is being amortized over 40 years from respective acquisition dates. The carrying value of the Company's goodwill is reviewed by division at least annually or whenever there are indications that the goodwill may be impaired. Income Taxes -- Income tax expense includes U.S. and foreign income taxes, including U.S. federal taxes on undistributed earnings of foreign subsidiaries to the extent such earnings are planned to be remitted. Taxes are not provided on the translation component of comprehensive income since the effect of translation is not considered to modify the amount of the earnings that are planned to be remitted. Environmental Remediation and Compliance -- Environmental remediation and postremediation monitoring costs are accrued when such obligations become probable and reasonably estimable. Such future expenditures are not discounted to their present value. Environmental costs that are capitalized are depreciated generally utilizing a 15-year life. Product Warranty -- Estimated warranty expense is accrued either at the time of sale or, in most cases, when specific warranty problems are encountered. Adjustments to the accruals are made periodically to reflect actual experience. Stock Options and Employee Stock Purchase Plan -- Options to purchase Common stock are granted to certain executive officers and key employees at 100% of the market value of the Company's stock at the date of grant. As permitted, the Company follows Accounting Principles Board Opinion No. 25 and, as a result, no compensation expense is recognized under its stock option plans or the Employee Stock Purchase Plan. Derivative Financial Instruments -- The Company periodically enters into interest rate swap agreements that modify the interest characteristics of its outstanding debt. Interest rate differentials to be paid or received as a result of interest rate swap agreements are recognized over the lives of the swaps as an adjustment to interest expense. Gains and losses on early terminations of these agreements would be deferred and amortized as an adjustment to interest expense over the remaining term of the original life of the swap agreement. The fair value of swap agreements and changes in fair value as a result of changes in market interest rates are not recognized in the financial statements. Additionally, treasury locks, or forward rate agreements, were utilized in prior years to hedge the interest rate on prospective long-term debt issuances. These treasury locks were replaced in March 1999 with interest rate swaps, which were subsequently terminated in December 1999. The unrealized net gain from these transactions is being amortized over the remaining term of the original life of the interest rate swaps (see Note 10 of the Notes to Consolidated Financial Statements for further information). The Company also has foreign currency forward contracts to hedge its cash flow exposure on significant transactions denominated in currencies other than the U.S. dollar. These contracts are entered into for periods consistent with the terms of the underlying transactions. The Company does not engage in speculation. Unrealized gains and losses on foreign currency forward contracts are deferred and recognized as an adjustment to the basis of the underlying transaction at the time the foreign currency transaction is completed. Cash Equivalents -- For purposes of the Consolidated Cash Flows statement, the Company considers all investments purchased with original maturities of three months or less to be cash equivalents. New Accounting Pronouncements -- Statement of Financial Accounting Standards (SFAS) No.133 (Accounting for Derivative Instruments and Hedging Activities), to be adopted in the first quarter of 2001, will require the Company to recognize all derivatives on its balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. Given the limited number of derivative transactions in which the Company typically engages, the effect of the new standard will not be material when adopted and is not currently expected to be material in the future. NOTE 2: NONRECURRING/UNUSUAL CHARGES (CREDITS) The nonrecurring/unusual charges (credits) by segment for the last three years were as follows:
YEARS ENDED DECEMBER 31, - ---------------------------------------------------------------------------------------------- (dollars in thousands) 2000 1999 1998 - ---------------------------------------------------------------------------------------------- Cameron $ 8,121 $ 15,881 $ 6,063 CCV 1,448 9,873 7,796 CES 67,503 29,385 7,810 CES - Gain on sale of rotating compressor product line -- (45,262) -- CTC 327 708 287 - ---------------------------------------------------------------------------------------------- $77,399 $ 10,585 $21,956 - ----------------------------------------------------------------------------------------------
During 2000, the Company recorded approximately $77,399,000 ($55,847,000 in 1999) of "nonrecurring/unusual charges." Of the total charges recorded in 2000, approximately $48,277,000 relate to new actions and decisions made during 2000 and the remainder relate to prior year actions and decisions where the costs under existing accounting rules were required to be expensed as incurred. Of the 2000 total, approximately $36,966,000 represented non-cash write-offs or write-downs of tangible and intangible assets and $40,433,000 reflected either cash expenditures or accruals for cash that will be spent in future periods. Of the cash total, approximately $12,168,000 related to employee severance for approximately 350 employees and other employee costs including workmen's compensation, medical, pay-to-stay agreements and similar items, $8,841,000 related to personnel and equipment relocation, $5,378,000 related to facility clean-up (including environmental) and rearrangement, $6,356,000 related to operating costs for redundant facilities being held for sale and $7,690,000 related to productivity degradation, including outsourcing during phase-out and other costs. The major projects included approximately $32,659,000 related to the fourth quarter decision to exit CES's new unit Superior engine product line and the resulting shutdown of its manufacturing facility in Springfield, Ohio; $14,126,000 related to remaining costs associated with CES's late 1999 decision to cease all manufacturing and foundry operations in Grove City, Pennsylvania; $13,503,000 resulting from the relocation of all manufacturing, warehousing and other operations from Mt. Vernon, Ohio (original segment headquarters for CES) to other locations pursuant to the 1999 sale of CES's rotating compressor business to Rolls-Royce plc; $6,634,000 related to the write-off of the Canadian translation component in connection with the sale of this business; $4,058,000 related to the relocation of Cameron's drilling BOP stack and subsea "Christmas tree" manufacturing from Ville Platte, Louisiana to Liberty, Texas (subsea trees) and Beziers, France (BOPs); $2,826,000 related to the shutdown of Cameron's manufacturing facility in Vienna, Austria and relocation of this capacity to other European locations; and $3,593,000 associated with various facility shutdown and realignment costs and other actions for each of the divisions. Except for additional costs that will be expensed in 2001 related to the shutdown of the Superior engine business, the Company currently anticipates that its results will not include any other non-recurring/unusual charges during 2001. The Company currently estimates that the additional costs, which will be incurred during the first two quarters of 2001, will total between $20,000,000 and $25,000,000 and will include employee severance and related costs, employee and equipment relocation, operating period costs related to the Springfield facility during the shutdown and other items which are required to be recognized either when the liability is incurred or when the cash is actually spent. The Company has decided to include the operating period costs associated with the Superior engine business during its shutdown on the "nonrecurring/unusual" expense line because these costs are being eliminated by the shutdown and because the small amount of sales which the new unit engine business will have during 2001 are not anticipated to generate any operating profit before period costs. For the year ended December 31, 2000, the Superior engine business generated revenues of $14,467,000 and incurred a loss before shared general and administrative costs, taxes and nonrecurring/unusual charges of approximately $12,900,000. On September 30, 1999, the Company completed the sale to Rolls-Royce plc of the CES division's rotating compressor product line, which included centrifugal compressors, power turbines and En-Tronic(R) controls. The operations that were sold had primary facilities in Mt. Vernon, Ohio, Liverpool, United Kingdom and Hengelo in the Netherlands. The Company received $203,160,000 in cash in connection with the sale and will receive in 2001 an additional $2,200,000, based on the final balance sheet for the business. Included in the sale was the Company's 50% interest in Cooper Rolls, Inc., a marketing joint venture company equally owned with Rolls-Royce prior to the transaction. The Company recorded a pre-tax gain from the sale totaling $45,262,000. The rotating compressor product line generated revenues through September 30, 1999 of approximately $93,100,000 and incurred a loss, including an allocation of certain shared general and administrative costs, over the same period before interest, taxes, depreciation, amortization and nonrecurring charges of approximately $8,400,000. Cameron recorded approximately $13,176,000 during 1999 for employee severance, primarily associated with the continued rationalization of its operations in the U.S., the U.K. and France in response to decreased market demand that began in 1998. The remaining nonrecurring charges for 1999 relate primarily to employee severance and other costs associated with the closure of this segment's manufacturing facility in Austria, which was initiated at the end of the second quarter. The charges during 1998 consisted primarily of costs associated with the termination of specific employees in connection with the decline in market activity described above. Nearly three-fourths of the costs incurred during 1998 related to this segment's operations in the U.S., the U.K. and France. The $17,669,000 of nonrecurring/unusual charges recorded by CCV during 1998 and 1999 relate to: (i) the shutdown (including severance, relocation and other costs) of a manufacturing facility in Missouri City, Texas (announced in the third quarter of 1998), (ii) one-time acquisition costs relating to the 1998 acquisition of Orbit Valve International, Inc. (see Note 3 of the Notes to Consolidated Financial Statements) and (iii) severance, primarily associated with employment reductions at this segment's operations in Beziers, France. The transfer of production from the Missouri City facility to another facility in Oklahoma City, Oklahoma was substantially completed during the early part of 1999 and the Missouri City facility will be sold in due course. CES recorded approximately $29,385,000 during 1999 (including nearly $15,212,000 of non-cash asset impairment charges) relating to employee severance, the announced shutdown of the Company's underutilized foundry and associated machining operations in Grove City, Pennsylvania and the relocation of its compressor plant in Mt. Vernon, Ohio. The remaining 1999 costs primarily relate to employee relocations and various facility/warehouse consolidations. The costs incurred during 1998 were associated with the severance and relocation of salaried personnel in the Mt. Vernon and Grove City facilities. In all three years, CTC's nonrecurring charges related to employee severance associated with declining demand in that segment's markets. The cash flow effect of the above actions (excluding proceeds from the sale of the rotating business) was approximately $37,488,000 in 2000, $37,409,000in 1999 and $10,406,000 in 1998. NOTE 3: ACQUISITIONS/DISPOSITIONS During 2000, CES sold its Canadian aftermarket operations to a company that is now a distributor of CES's products in that country. Proceeds from the sale totaled approximately $10,800,000. Because the sale resulted in the cessation of all of CES's operations in Canada, a $6,634,000 non-cash, non-tax-deductible write-off of the accumulated translation component for the Canadian legal entity was recorded as a nonrecurring/unusual charge in addition to what was otherwise a break-even sale. Additionally, Cameron sold its interest in one of its joint ventures in Venezuela to the majority partner and, near year-end, made a small product line acquisition. CCV acquired a valve repair business located in Houston, Texas early in the year at a cash cost of approximately $4,200,000. Both acquisitions are being accounted for under the purchase method of accounting. Goodwill associated with these acquisitions was not material. During 1999, in addition to the sale of the rotating compressor product line by CES (see Note 2 of the Notes to Consolidated Financial Statements), Cameron acquired the remaining interest in another joint venture located in Venezuela in which it previously held a 49% equity interest. Prior to the acquisition, which was accounted for under the purchase method of accounting, the Company included its share of the operating results of the joint venture in its results of operations using the equity method. The acquisition resulted in additional goodwill of approximately $3,500,000. Effective April 2, 1998, the Company acquired Orbit Valve International, Inc. for approximately $104,000,000 in cash and assumed indebtedness. Orbit, which has been integrated into CCV, is based in Little Rock, Arkansas and manufactures and sells high-performance valves for the oil and gas and petrochemical industries. Orbit generated revenues of approximately $71,000,000 from the acquisition date through December 31, 1998. Additionally, during July 1998, the Company acquired certain assets and assumed certain liabilities of Brisco Engineering Ltd., a U.K. company, for approximately $12,400,000 in cash and debt. The acquired operations, which participate in the repair and aftermarket parts business for control systems, have been consolidated into the Cameron organization. The two purchase acquisitions resulted in additional goodwill of $63,786,000. Three other small product line acquisitions were also made during 1998 to supplement the Company's aftermarket operations. The results of operations from all acquisitions have been included with the Company's results for the year ended December 31, 1998 from the respective acquisition dates forward. NOTE 4: RECEIVABLES DECEMBER 31, - ------------------------------------------------------------------------------ (dollars in thousands) 2000 1999 - ------------------------------------------------------------------------------ Trade receivables $261,197 $243,336 Other receivables 10,651 31,152 Allowance for doubtful accounts (3,080) (2,977) - ------------------------------------------------------------------------------ $268,768 $271,511 - ------------------------------------------------------------------------------ NOTE 5: INVENTORIES DECEMBER 31, - ------------------------------------------------------------------------------ (dollars in thousands) 2000 1999 - ------------------------------------------------------------------------------ Raw materials $ 36,286 $ 43,851 Work-in-process 108,418 126,949 Finished goods, including parts and subassemblies 293,187 301,910 Other 2,138 2,712 - ------------------------------------------------------------------------------ 440,029 475,422 Excess of current standard costs over LIFO costs (55,148) (58,951) Allowance for obsolete inventory (12,141) (16,433) - ------------------------------------------------------------------------------ $372,740 $400,038 - ------------------------------------------------------------------------------
NOTE 6: PLANT AND EQUIPMENT AND INTANGIBLES DECEMBER 31, - ----------------------------------------------------------------------------------------------------- (dollars in thousands) 2000 1999 - ----------------------------------------------------------------------------------------------------- Plant and equipment: Land and land improvements $ 35,540 $ 36,954 Buildings 173,555 174,645 Machinery and equipment 406,239 402,187 Tooling, dies, patterns, etc. 58,906 55,845 Assets under capital leases 22,964 22,684 All other 99,450 102,637 Construction in progress 35,659 17,253 - ----------------------------------------------------------------------------------------------------- 832,313 812,205 Accumulated depreciation (429,093) (392,592) - ----------------------------------------------------------------------------------------------------- $ 403,220 $ 419,613 - ----------------------------------------------------------------------------------------------------- Intangibles: Goodwill $ 437,480 $ 455,115 Assets related to pension plans 371 371 Other 58,531 53,297 - ----------------------------------------------------------------------------------------------------- 496,382 508,783 Accumulated amortization (234,782) (227,829) - ----------------------------------------------------------------------------------------------------- $ 261,600 $ 280,954 - -----------------------------------------------------------------------------------------------------
NOTE 7: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES DECEMBER 31, - ----------------------------------------------------------------------------------------------------- (dollars in thousands) 2000 1999 - ----------------------------------------------------------------------------------------------------- Trade accounts and accruals $ 186,153 $ 230,286 Salaries, wages and related fringe benefits 59,770 55,456 Product warranty, late delivery, and similar costs 16,812 20,187 Deferred income taxes 27,269 34,962 Nonrecurring/unusual charges 10,488 10,328 Other (individual items less than 5% of total current liabilities) 24,512 43,752 - ----------------------------------------------------------------------------------------------------- $ 325,004 $ 394,971 - -----------------------------------------------------------------------------------------------------
NOTE 8: EMPLOYEE BENEFIT PLANS POSTRETIREMENT PENSION BENEFITS BENEFITS - ------------------------------------------------------------------------------------------------------------------------------- (dollars in thousands) 2000 1999 1998 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------- Service cost $ 7,569 $ 9,598 $ 9,287 $ 67 $ 168 $ 189 Interest cost 17,825 18,366 17,929 3,123 2,928 3,254 Expected return on plan assets (31,921) (30,653) (28,425) -- -- -- Amortization of prior service cost (188) (266) (404) (200) (300) (700) Amortization of (gains) losses and other (9,442) (5,802) (4,320) (10,100) (10,600) (9,700) - ------------------------------------------------------------------------------------------------------------------------------- Net periodic benefit income (16,157) (8,757) (5,933) (7,110) (7,804) (6,957) Curtailment (gain) loss 53 (446) -- (300) -- -- Settlement gain (1,484) (2,087) -- -- -- -- Termination benefit expense 304 -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------- Total net benefit income $(17,284) $(11,290) $ (5,933) $ (7,410) $ (7,804) $ (6,957) - -------------------------------------------------------------------------------------------------------------------------------
POSTRETIREMENT PENSION BENEFITS BENEFITS - --------------------------------------------------------------------------------------------------------- (dollars in thousands) 2000 1999 2000 1999 - --------------------------------------------------------------------------------------------------------- Change in benefit obligation: Benefit obligation at beginning of year $275,707 $289,547 $ 43,708 $ 51,298 Service cost 7,569 9,598 67 168 Interest cost 17,825 18,366 3,123 2,928 Plan participants' contributions 754 911 -- -- Amendments 350 1,059 -- -- Change in discount rate/remeasurement impact -- (14,507) -- -- Actuarial (gains) losses (3,594) (3,743) (8) (5,429) Merger of acquired company plan 4,248 -- -- -- Exchange rate changes (8,752) (4,211) -- -- Curtailment results 121 612 (139) -- Settlement results 4,411 4,314 -- -- Termination benefit results 304 -- -- -- Benefits paid directly or from plan assets (25,286) (26,239) (4,840) (5,257) - --------------------------------------------------------------------------------------------------------- Benefit obligation at end of year $273,657 $275,707 $ 41,911 $ 43,708 - ---------------------------------------------------------------------------------------------------------
POSTRETIREMENT PENSION BENEFITS BENEFITS - --------------------------------------------------------------------------------------------------------- (dollars in thousands) 2000 1999 2000 1999 - --------------------------------------------------------------------------------------------------------- Change in plan assets: Fair value of plan assets at beginning of year $361,531 $342,130 $ -- $ -- Actual return on plan assets 15,330 42,212 -- -- Actuarial gains (losses) 8,551 7,435 -- -- Company contributions 158 705 4,840 5,257 Plan participants' contributions 754 911 -- -- Merger of acquired company plan 5,310 -- -- -- Exchange rate changes (10,873) (4,151) -- -- Impact of remeasurement -- (1,875) -- -- Benefits paid from plan assets (24,942) (25,836) (4,840) (5,257) - --------------------------------------------------------------------------------------------------------- Fair value of plan assets at end of year $355,819 $361,531 $ -- $ -- - ---------------------------------------------------------------------------------------------------------
POSTRETIREMENT PENSION BENEFITS BENEFITS - --------------------------------------------------------------------------------------------------------- (dollars in thousands) 2000 1999 2000 1999 - --------------------------------------------------------------------------------------------------------- Plan assets in excess of (less than) benefit obligations at end of year $ 82,162 $ 85,824 $(41,911) $(43,708) Unrecognized net (gain) loss (14,688) (33,478) (6,223) (16,315) Unrecognized prior service cost (2,099) (2,577) (439) (800) Unrecognized net transition (asset) 151 266 -- -- - --------------------------------------------------------------------------------------------------------- Prepaid (accrued) pension cost 65,526 50,035 (48,573) (60,823) Underfunded plan adjustments recognized: Accrued minimum liability (888) (888) -- -- Intangible asset 371 371 -- -- Accumulated other comprehensive income, net of tax 388 388 -- -- - --------------------------------------------------------------------------------------------------------- Net assets (liabilities) recognized on balance sheet at end of year $ 65,397 $ 49,906 $(48,573) $(60,823) - ---------------------------------------------------------------------------------------------------------
POSTRETIREMENT PENSION BENEFITS BENEFITS - --------------------------------------------------------------------------------------- 2000 1999 2000 1999 - ----------------------------------------------------------------------------------------- Weighted-average assumptions as of December 31: Domestic plans: - --------------- Discount rate 7.75% 7.5% 7.65% 7.53% Expected return on plan assets 9.25% 9.25% Rate of compensation increase 4.5% 4.5% Health care cost trend rate 7.5% 7.5% International plans: - -------------------- Discount rate 6.0 - 6.25% 6.0 - 6.25% Expected return on plan assets 6.0 - 8.5% 6 - 9% Rate of compensation increase 3.5 - 4.5% 3.5 - 4.5%
The rate of compensation increase is based on an age-grade scale ranging from 7.5% to 3.0% with a weighted-average rate of approximately 4.5%. The health care cost trend rate is assumed to decrease gradually from 7.5% to 5% by 2006 and remain at that level thereafter. A one-percentage-point change in the assumed health care cost trend rate would have the following effects:
1 - PERCENTAGE 1 - PERCENTAGE (dollars in thousands) POINT INCREASE POINT DECREASE - -------------------------------------------------------------------------------------- Effect on total of service and interest cost components in 2000 $ 229 $ (204) Effect on postretirement benefit obligation as of December 31, 2000 $2,956 $(2,640)
Amounts applicable to the Company's pension plans with projected and accumulated benefit obligations in excess of plan assets are as follows:
(dollars in thousands) 2000 1999 - -------------------------------------------------------------------------------------- Projected benefit obligation $(8,514) $(8,675) Accumulated benefit obligation $(7,595) $(7,767) Fair value of plan assets $ 2,669 $ 2,728
The Company sponsors the Cooper Cameron Corporation Retirement Plan (Retirement Plan) covering all salaried U.S. employees and certain domestic hourly employees, as well as separate defined benefit pension plans for employees of its U.K. and German subsidiaries, and several unfunded defined benefit arrangements for various other employee groups. Aggregate pension expense (income) amounted to $(9,501,000) in 2000, $(1,851,000) in 1999 and $5,121,000 in 1998. The Company's income with respect to the defined benefit pension plans is set forth in the table above. The Company's change in the discount rate for domestic pension plans from 7.5% in 1999 to 7.75% in 2000 did not affect 2000 income but will increase pension income slightly in 2001. The change in 1999 to 7.5% from 6.5% increased 1999 pension income by approximately $900,000 and year 2000 pension income by $2,332,000. Expense with respect to various defined contribution plans for the years ended December 31, 2000, 1999 and 1998 amounted to $7,783,000, $9,439,000 and $11,054,000, respectively. In 2000, a settlement gain of $1,484,000 ($2,087,000 in 1999) was recognized as a result of the large number of payouts during the year which required accelerated recognition of a portion of the Retirement Plan's unrecognized net gain. In connection with the sale of the rotating compressor business in September 1999, the Company has retained all defined benefit pension and postretirement benefit liabilities earned by employees of this business through the date of sale. The assets of the domestic and foreign plans are maintained in various trusts and consist primarily of equity and fixed income securities. In addition, the Company's full-time domestic employees who are not covered by a bargaining unit are also eligible to participate in the Cooper Cameron Corporation Retirement Savings Plan. Under this plan, employees' savings deferrals are partially matched with shares of the Company's Common stock. The Company's expense under this plan equals the matching contribution under the Plan's formula. Expense for the years ended December 31, 2000, 1999 and 1998 amounted to $7,349,000, $7,598,000 and $8,432,000, respectively. The Company's salaried employees also participate in various domestic employee welfare benefit plans, including medical, dental and prescriptions, among other benefits for active employees. Salaried employees who retired prior to 1989, as well as certain other employees who were near retirement at that date and elected to receive certain benefits, have retiree medical and prescription benefits and, if retirement occurred prior to January 1, 1998, have life insurance benefits, while active salaried employees do not have postretirement health care or life insurance benefits. The hourly employees have separate plans with varying benefit formulas, but currently active employees, except for certain employees similar to those described above, will not receive health care benefits after retirement. All of the welfare benefit plans, including those providing postretirement benefits, are unfunded. NOTE 9: STOCK OPTIONS AND EMPLOYEE STOCK PURCHASE PLAN
NUMBER OF SHARES ----------------------------- LONG-TERM AND BROAD BASED NON-EMPLOYEE WEIGHTED INCENTIVE DIRECTOR AVERAGE PLANS PLAN EXERCISE PRICES - ---------------------------------------------------------------------------------------------------------- Stock options outstanding at December 31, 1997 6,046,647 243,592 $26.02 Options granted 2,485,019 96,540 $35.32 Options cancelled (154,352) -- $33.00 Options exercised (1,324,498) (21,592) $16.65 - ---------------------------------------------------------------------------------------------------------- Stock options outstanding at December 31, 1998 7,052,816 318,540 $30.84 Options granted 1,646,113 61,740 $41.35 Options cancelled (230,004) -- $36.80 Options exercised (884,744) -- $17.74 - ---------------------------------------------------------------------------------------------------------- Stock options outstanding at December 31, 1999 7,584,181 380,280 $34.38 Options granted 2,472,205 72,548 $58.24 Options cancelled (206,242) -- $31.74 Options exercised (4,382,012) (128,054) $31.80 - ---------------------------------------------------------------------------------------------------------- Stock options outstanding at December 31, 2000/1/ 5,468,132 324,774 $46.96 - ---------------------------------------------------------------------------------------------------------- Stock options exercisable at December 31, 2000/1/ 2,215,089 237,294 $46.80 - ----------------------------------------------------------------------------------------------------------
1 Exercise prices range from $8.329 to $79.9375 per share. Options are granted to key employees under the Long-term and Broad Based Incentive Plans and generally become exercisable on the first anniversary date following the date of grant in one-third increments each year or in annual increments of one-sixth, one-third, one-third and one-sixth. In 1998, options that fully vested at the end of 1999 were also granted to a limited number of employees. These options all expire ten years after the date of grant. Certain key executives also elected in 2000 to receive options in lieu of salary for the year ended December 31, 2001. The options granted under the Options in Lieu of Salary Program generally become exercisable at the end of the related salary period and expire five years after the beginning of the salary period. Similar options were not granted in 1999 with respect to salary for the year 2000 but were granted in 1998 for the salary year beginning on January 1, 1999. Under the Company's Non-employee Director Stock Option Plan, non-employee directors receive a grant of 6,000 stock options annually. In addition, directors are permitted to take either a portion of or their full annual retainer in cash ($30,000) or receive, in lieu of cash, additional stock options. All directors elected to receive all of their retainer in stock options for 2000, 1999 and 1998. The election to receive their entire retainer in stock options and the grant of these options, covering 25,740 shares, for the year 2001 was made during 2000. Similarly, in 1999, 25,740 shares were granted for the year 2000 and, in 1998, 25,740 shares were granted for the year 1999 in addition to 34,800 shares for the year 1998. The exercise price of each option is based on the fair market value of the Company's stock at the date of grant. The options generally expire five years after the date of grant and become exercisable one year following the date of grant. In the case of options granted in lieu of retainer, the options become exercisable one year following the beginning of the retainer period and expire five years following the beginning of the retainer period. As of December 31, 2000, shares reserved for future grants under the Long-term Incentive, Broad Based Incentive, and Non-employee Director Stock Option Plans were 2,413,757, 2,800 and 395,198, respectively. The weighted-average remaining contractual life of all options at December 31, 2000 is approximately 7.2 years. Pro forma information is required by SFAS No. 123 to reflect the estimated effect on net income and earnings per share as if the Company had accounted for the stock option grants and the Employee Stock Purchase Plan (ESPP) using the fair value method described in that Statement. The fair value was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 2000, 1999 and 1998, respectively: risk-free interest rates of 5.8%, 5.5% and 5.2%; dividend yields of zero for each year; volatility factors of the expected market price of the Company's Common stock of .488, .494 and .482; and a weighted-average expected life of the options of 3.4, 3.6 and 4.0 years. These assumptions resulted in a weighted- average grant date fair value for options and the ESPP of $24.29 and $18.98, respectively, for 2000; $17.02 and $10.56, respectively, for 1999; and $15.18 and $10.11, respectively, for 1998. For purposes of the pro forma disclosures, the aggregate estimated fair value is amortized to expense over the vesting period. Reflecting the amortization of this hypothetical expense in 2000, 1999 and 1998 results in pro forma net income (loss) and diluted earnings (loss) per share of $(4,934,000) and $(0.09), respectively, for 2000; $20,417,000 and $0.36, respectively, for 1999; and $118,562,000 and $2.11, respectively, for 1998. EMPLOYEE STOCK PURCHASE PLAN Under the Cooper Cameron Employee Stock Purchase Plan, the Company is authorized to sell up to 2,000,000 shares of Common stock to its full-time employees in the United States, U.K., Ireland, Singapore and Canada, nearly all of whom are eligible to participate. Under the terms of the Plan, employees may elect each year to have up to 10% of their annual compensation withheld to purchase the Company's Common stock. The purchase price of the stock is 85% of the lower of the beginning-of-plan year or end-of-plan year market price of the Company's Common stock. Under the 2000/2001 plan, over 1,600 employees elected to purchase approximately 108,000 shares of the Company's Common stock at $55.83 per share, or 85% of the market price of the Company's Common stock on July 31, 2001, if lower. A total of 163,454 shares were purchased at $31.03 per share on July 31, 2000 under the 1999/2000 plan. NOTE 10: LONG-TERM DEBT DECEMBER 31, - -------------------------------------------------------------------------------- (dollars in thousands) 2000 1999 - -------------------------------------------------------------------------------- Floating-rate revolving credit advances $170,463 $125,341 Other long-term debt 14,493 75,059 Obligations under capital leases 7,316 9,932 - -------------------------------------------------------------------------------- 192,272 210,332 Current maturities (4,212) (14,472) - -------------------------------------------------------------------------------- Long-term portion $188,060 $195,860 - -------------------------------------------------------------------------------- The Company is party to a long-term credit agreement (the Credit Agreement) with various banks which provides for an aggregate unsecured borrowing capacity of $475,000,000 of floating-rate revolving credit advances maturing March 31, 2002. The Company is required to pay a facility fee on the committed amount under the Credit Agreement, which at December 31, 2000 equalled .075% annually. In addition to the above, the Company also has other unsecured and uncommitted credit facilities available both domestically and to its foreign subsidiaries. At December 31, 2000, the weighted-average interest rate on the revolving credit advances was 6.82% (6.35% at December 31, 1999). The average interest rate on the remaining debt was 6.24% at December 31, 2000 (6.86% at December 31, 1999) excluding approximately $1,288,000 of dollar equivalent local currency indebtedness in Brazil at a notional rate (before currency effects) of 22.4% annually. At December 31, 2000, the Company reclassified as long-term $4,058,000 ($54,529,000 at December 31, 1999) of indebtedness which by its terms represents a current liability reflecting the Company's intention and ability to refinance such amounts under the Credit Agreement. As a result, future maturities of the floating-rate revolving credit advances and other long-term debt are $350,000 and $184,606,000 for the years 2001 and 2002, respectively. During March 1999, the Company entered into interest rate swaps with various financial institutions to effectively convert $175,000,000 of outstanding floating rate debt to fixed rate debt at a weighted-average interest rate of 6.46%. This transaction replaced existing treasury locks, or forward rate agreements. The Company paid $8,235,000 to the counterparties to the treasury locks in connection with the termination of these agreements. In December 1999, the Company terminated the interest rate swaps, receiving $11,239,000 from the counterparties to these agreements. Of the net $3,004,000 gain, $899,000 was recognized in the fourth quarter of 1999 and the remainder is being amortized to interest expense over the remaining 10-year life of the interest rate swaps. During January 2001, the Company entered into interest rate swaps which effectively converted $155 million of outstanding floating rate debt to fixed rate debt at a weighted-average interest rate of 5.24%. The majority of these swaps extend through March 2002. At December 31, 2000, the Company had $304,537,000 of committed borrowing capacity available plus additional uncommitted amounts available under various other borrowing arrangements. Under the terms of the Credit Agreement, the Company is required to maintain certain financial ratios including a debt-to-capitalization ratio of not more than 50%, except in certain instances involving acquisitions, and a coverage ratio of earnings before interest, taxes, depreciation and amortization (EBITDA) less capital expenditures equal to at least 2.5 times interest expense. The Credit Agreement also specifies certain limitations regarding additional indebtedness outside the Credit Agreement and the amounts invested in the Company's foreign subsidiaries. The Company has been, throughout all periods reported, and was, at December 31, 2000, in compliance with all loan covenants. For the years 2000, 1999 and 1998, total interest expense was $18,038,000, $27,834,000 and $32,721,000, respectively. Interest paid by the Company in 2000, in 1999 and in 1998 (after considering $2,187,000 of interest capitalized during 1998) is not materially different than the amounts expensed. The Company leases certain facilities, office space, vehicles and office, data processing and other equipment under capital and operating leases. The obligations with respect to these leases are generally for five years or less and are not considered to be material individually or in the aggregate.
NOTE 11: INCOME TAXES YEARS ENDED DECEMBER 31, - ------------------------------------------------------------------------------------------------------------ (dollars in thousands) 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------ Income (loss) before income taxes: U.S. operations $(26,137) $ 13,536 $ 58,976 Foreign operations 69,910 57,380 136,752 - ------------------------------------------------------------------------------------------------------------ Income before income taxes $ 43,773 $ 70,916 $ 195,728 - ------------------------------------------------------------------------------------------------------------ Income taxes: Current: U.S. federal $ 54,242 $ 10,805 $ 14,973 U.S. state and local and franchise 9,432 4,501 3,934 Foreign 16,375 23,296 34,628 - ------------------------------------------------------------------------------------------------------------ 80,049 38,602 53,535 - ------------------------------------------------------------------------------------------------------------ Deferred: U.S. federal (61,318) (6,829) 126 U.S. state and local (9,221) (1,026) 19 Foreign 6,603 (2,833) 5,892 - ------------------------------------------------------------------------------------------------------------ (63,936) (10,688) 6,037 - ------------------------------------------------------------------------------------------------------------ Income tax provision $ 16,113 $ 27,914 $ 59,572 - ------------------------------------------------------------------------------------------------------------ Items giving rise to deferred income taxes: Reserves and accruals $ 12,895 $ (16,349) $ 812 Inventory allowances, full absorption and LIFO 5,842 (8,315) 3,906 Percentage of completion income (recognized) not recognized for tax -- (2,018) (2,877) Pension and postretirement benefit income not currently taxable 9,234 7,162/1/ 4,856/1/ U.S. tax deductions less than (in excess of) amounts currently deductible (85,635) 15,744 (5,927) Other (6,272) (6,912)/1/ 5,267/1/ - ------------------------------------------------------------------------------------------------------------ Deferred income taxes $(63,936) $ (10,688) $ 6,037 - ------------------------------------------------------------------------------------------------------------ The differences between the provision for income taxes and income taxes using the U.S. federal income tax rate were as follows: U.S. federal statutory rate 35.00% 35.00% 35.00% Nondeductible goodwill 7.32 4.48 1.52 State and local income taxes (0.03) 2.37 0.93 Tax exempt income (1.60) (0.99) (1.43) Foreign statutory rate differential (11.61) (2.75) (2.30) Change in valuation of prior year tax assets (4.34) (3.24) (1.04)/1/ Foreign losses (receiving) not receiving a tax benefit (1.08) 2.64 (1.62)/1/ Translation write-offs not deductible for tax 7.27 -- -- Nondeductible expenses 2.40 1.28/1/ 0.41 /1/ All other 3.48 0.57/1/ (1.03)/1/ - ------------------------------------------------------------------------------------------------------------ Total 36.81% 39.36% 30.44% - ------------------------------------------------------------------------------------------------------------ Total income taxes paid $ 14,724 $ 42,696 $ 22,166 - ------------------------------------------------------------------------------------------------------------
1 Revised for comparability. The year-to-year percentage changes above are more indicative of year-to-year changes in pre-tax income than changes in the amount of deductible or non- deductible items, except for the translation write-offs that should not recur in future periods.
December 31, - ------------------------------------------------------------------------------------------ (dollars in thousands) 2000 1999 - ------------------------------------------------------------------------------------------ Components of deferred tax balances: Deferred tax liabilities: Plant and equipment $ (34,879) $ (38,415) Inventory (51,470) (45,628) Pensions (24,272) (18,242)/1/ Other (19,687) (27,554)/1/ - ------------------------------------------------------------------------------------------ Total deferred tax liabilities (130,308) (129,839) - ------------------------------------------------------------------------------------------ Deferred tax assets: Postretirement benefits other than pensions 18,579 23,265 Reserves and accruals 39,088 51,916 Net operating losses and related deferred tax assets 98,014 9,058 Other 1,440 7,021 - ------------------------------------------------------------------------------------------ Total deferred tax assets 157,121 91,260 - ------------------------------------------------------------------------------------------ Valuation allowance (16,201) (18,695) - ------------------------------------------------------------------------------------------ Net deferred tax assets (liabilities) $ 10,612 $ (57,274) - ------------------------------------------------------------------------------------------
1 Revised for comparability During each of the last three years, certain of the Company's international operations have incurred losses that have not been tax benefited, while others, that had losses in a prior year, generated earnings in a subsequent year that utilized the prior year unrecorded benefit of the loss. In addition, during 2000, 1999 and 1998, respectively, $1,900,000, $2,300,000 and $2,032,000 of deferred tax assets that had been reserved in prior years were realized and the related reserves were reversed. The effect of these items on the Company's overall effective tax rate are included in the rate reconciliation captions: "Change in valuation of prior year tax assets" and "Foreign losses (receiving) not receiving a tax benefit". As a result of all of the foregoing, the valuation allowances established in prior years were reduced in 2000, 1999 and 1998 by $2,494,000, $425,000 and $5,201,000, respectively, with a corresponding reduction in the Company's income tax expense. During 2000, the Company domestically had tax deductions, including those related to stock options (discussed below), which were greater than the amounts that could be utilized currently as a reduction of actual taxes payable. As a result, the Company paid essentially no U.S. federal income tax in 2000 and recorded $85,635,000 of deferred tax assets related to these excess deductions that will require taxable income in future years in order to be realized. The Company has until the year 2020 to utilize these excess deductions. As a result, in management's judgement there is presently essentially no risk that this asset will not be realized. In 1999, all of the deferred tax assets recorded in 1998 and prior years with respect to U.S. taxable losses were utilized such that, along with other deductions originating in 1999, the Company also paid only a small amount of actual tax during 1999 on its domestic earnings, including the gain on the sale of the rotating compressor product line. During 2000, 1999, and 1998, a major item giving rise to the domestic excess deductions was the tax benefit that the Company receives with respect to certain employee stock benefit plan transactions. This benefit, which is credited to capital in excess of par value, amounted to $59,624,000, $5,693,000 and $15,223,000 in 2000, 1999 and 1998, respectively. The Company's tax provision includes U.S. tax expected to be payable on the foreign portion of the Company's income before income taxes when such earnings are remitted. The Company's accruals are sufficient to cover the additional U.S. taxes estimated to be payable on the earnings that the Company anticipates will be remitted. Through December 31, 2000, this amounted to essentially all unremitted earnings of the Company's foreign subsidiaries except certain unremitted earnings in the U.K., Ireland and Singapore, which are considered to be permanently reinvested. NOTE 12: COMMON STOCK, PREFERRED STOCK AND RETAINED DEFICIT COMMON STOCK Under its Amended and Restated Certificate of Incorporation, the Company is authorized to issue up to 150,000,000 shares of common stock, par value $.01 per share. In November 1998, the Company's board of directors approved the repurchase of up to 10,000,000 shares of Common stock for use in the Company's various employee stock ownership, option and benefit plans. In December 1999, the Company exercised its option under outstanding forward purchase agreements to purchase 3,515,900 shares of its common stock from various third parties at a specified price as defined in the agreements. The total amount paid was $98,378,000, which includes $6,046,000 of prepaid acquisition costs. In addition, the Company also purchased 709,700 shares in January 1998. Treasury shares were utilized to satisfy stock option exercises and stock issuances under the Employee Stock Purchase Plan. At December 31, 2000, 9,774,013 shares of unissued Common stock were reserved for future issuance under the various employee benefit plans. PREFERRED STOCK The Company is authorized to issue up to 10,000,000 shares of preferred stock, par value $.01 per share. At December 31, 2000, no preferred shares were issued or outstanding. Shares of preferred stock may be issued in one or more series of classes, each of which series or class shall have such distinctive designation or title as shall be fixed by the Board of Directors of the Company prior to issuance of any shares. Each such series or class shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issuance of such series or class of preferred stock as may be adopted by the Board of Directors prior to the issuance of any shares thereof. A total of 1,500,000 shares of Series A Junior Participating Preferred Stock has been reserved for issuance upon exercise of the Stockholder Rights described below. STOCKHOLDER RIGHTS PLAN On May 23, 1995, the Company's Board of Directors declared a dividend distribution of one Right for each then-current and future outstanding share of Common stock. Each Right entitles the registered holder to purchase one one- hundredth of a share of Series A Junior Participating Preferred Stock of the Company, par value $.01 per share, for an exercise price of $300. Unless earlier redeemed by the Company at a price of $.01 each, the Rights become exercisable only in certain circumstances constituting a potential change in control of the Company, described below, and will expire on October 31, 2007. Each share of Series A Junior Participating Preferred Stock purchased upon exercise of the Rights will be entitled to certain minimum preferential quarterly dividend payments as well as a specified minimum preferential liquidation payment in the event of a merger, consolidation or other similar transaction. Each share will also be entitled to 100 votes to be voted together with the Common stockholders and will be junior to any other series of Preferred Stock authorized or issued by the Company, unless the terms of such other series provides otherwise. Except as otherwise provided in the Plan, in the event any person or group of persons acquire beneficial ownership of 20% or more of the outstanding shares of Common stock, each holder of a Right, other than Rights beneficially owned by the acquiring person or group (which will have become void), will have the right to receive upon exercise of a Right that number of shares of Common stock of the Company, or, in certain instances, Common stock of the acquiring person or group, having a market value equal to two times the current exercise price of the Right. RETAINED DEFICIT The Company's retained deficit includes a $441,000,000 charge related to the goodwill write-down that occurred concurrent with the Company becoming a separate stand-alone entity on June 30, 1995 in connection with the split-off from its former parent, Cooper Industries, Inc. Delaware law, under which the Company is incorporated, provides that dividends may be declared by the Company's board of directors from a current year's earnings as well as from the net of capital in excess of par value less the retained deficit. Accordingly, at December 31, 2000, the Company had approximately $878,844,000 from which dividends could be paid. NOTE 13: INDUSTRY SEGMENTS The Company's operations are organized into four separate business segments, each of which is also a division with a President who reports to the Company's Chairman and Chief Executive Officer. The four segments are Cameron, Cooper Cameron Valves (CCV), Cooper Energy Services (CES) and Cooper Turbocompressor (CTC). Cameron is a leading international manufacturer of oil and gas pressure control equipment, including wellheads, chokes, blowout preventers and assembled systems for oil and gas drilling, production and transmission used in onshore, offshore and subsea applications. Split out from Cameron as a separately managed business in mid-1995, CCV provides a full range of ball valves, gate valves, butterfly valves and accessories used primarily to control pressures and direct oil and gas as they are moved from individual wellheads through transmission systems to refineries, petrochemical plants and other processing centers. CES designs, manufactures, markets and services natural gas compression equipment including integral engine compressors, reciprocating compressors, turbochargers and control systems. Through September 30, 1999, CES operations also included a rotating compressor product line. See Note 2 for additional information regarding the sale of this business. CTC provides centrifugal air compressors and aftermarket products. CTC's customers include manufacturing companies and chemical process industries. The primary customers of Cameron, CCV and CES are major and independent oil and gas exploration and production companies, foreign national oil and gas companies, drilling contractors, pipeline companies, refiners and other industrial and petrochemical processing companies. The Company markets its equipment through a worldwide network of sales and marketing employees supported by agents and distributors in selected international locations. Due to the extremely technical nature of many of the products, the marketing effort is further supported by a staff of engineering employees. For the years ended December 31, 2000, 1999 and 1998, the Company incurred research and development costs, designed to enhance or add to its existing product offerings, totaling $27,276,000, $34,827,000 and $33,034,000, respectively. Cameron accounted for 78%, 78% and 79% of each respective year's total costs.
(dollars in thousands) FOR THE YEAR ENDED DECEMBER 31, 2000 - ---------------------------------------------------------------------------------------------------------------------- CORPORATE CAMERON CCV CES CTC & OTHER CONSOLIDATED - ---------------------------------------------------------------------------------------------------------------------- Revenues $ 838,341 $221,097 $ 224,822 $102,449 $ -- $1,386,709 - ---------------------------------------------------------------------------------------------------------------------- EBITDA/2/ $ 148,730 $ 37,069 $ 19,504 $ 24,193 $ (14,965) $ 214,531 Depreciation and amortization 45,711 11,379 10,727 6,644 860 75,321 Interest expense -- -- -- -- 18,038 18,038 Nonrecurring/unusual charges 8,121 1,448 67,503 327 -- 77,399 - ---------------------------------------------------------------------------------------------------------------------- Income (loss) before taxes $ 94,898 $ 24,242 $ (58,726) $ 17,222 $ (33,863) $ 43,773 - ---------------------------------------------------------------------------------------------------------------------- Capital expenditures $ 38,615 $ 5,981 $ 19,340 $ 2,572 $ 91 $ 66,599 - ---------------------------------------------------------------------------------------------------------------------- Total assets $ 884,187 $245,653 $ 171,568 $106,893 $ 85,572 $1,493,873 - ----------------------------------------------------------------------------------------------------------------------
(dollars in thousands) FOR THE YEAR ENDED DECEMBER 31, 1999 - ---------------------------------------------------------------------------------------------------------------------- CORPORATE CAMERON CCV CES CTC & OTHER CONSOLIDATED - ---------------------------------------------------------------------------------------------------------------------- Revenues/1/ $ 817,055 $233,581 $ 319,682 $104,743 $ -- $1,475,061 - ---------------------------------------------------------------------------------------------------------------------- EBITDA/2/ $ 139,281 $ 33,368 $ 9,947 $ 22,867 $ (12,412) $ 193,051 Depreciation and amortization 44,416 12,965 18,491 6,639 1,205 83,716 Interest expense -- -- -- -- 27,834 27,834 Nonrecurring/unusual charges 15,881 9,873 (15,877) 708 -- 10,585 - ---------------------------------------------------------------------------------------------------------------------- Income (loss) before taxes $ 78,984 $ 10,530 $ 7,333 $ 15,520 $ (41,451) $ 70,916 - ---------------------------------------------------------------------------------------------------------------------- Capital expenditures $ 38,835 $ 4,891 $ 16,925 $ 4,050 $ 208 $ 64,909 - ---------------------------------------------------------------------------------------------------------------------- Total assets $ 908,120 $245,102 $ 194,417 $101,867 $ 21,213 $1,470,719 - ----------------------------------------------------------------------------------------------------------------------
(dollars in thousands) FOR THE YEAR ENDED DECEMBER 31, 1998 - ---------------------------------------------------------------------------------------------------------------------- CORPORATE CAMERON CCV CES CTC & OTHER CONSOLIDATED - ---------------------------------------------------------------------------------------------------------------------- Revenues/1/ $1,024,685 $311,791 $ 422,496 $134,339 $ -- $1,893,311 - ---------------------------------------------------------------------------------------------------------------------- EBITDA/2/ $ 214,969 $ 60,906 $ 24,694 $ 32,691 $ (10,381) $ 322,879 Depreciation and amortization 34,795 12,509 17,884 6,253 1,033 72,474 Interest expense -- -- -- -- 32,721 32,721 Nonrecurring/unusual charges 6,063 7,796 7,810 287 -- 21,956 - ---------------------------------------------------------------------------------------------------------------------- Income (loss) before taxes $ 174,111 $ 40,601 $ (1,000) $ 26,151 $ (44,135) $ 195,728 - ---------------------------------------------------------------------------------------------------------------------- Capital expenditures $ 82,028 $ 5,563 $ 20,696 $ 6,291 $ 891 $ 115,469 - ---------------------------------------------------------------------------------------------------------------------- Total assets $1,041,738 $295,327 $ 359,739 $112,261 $ 14,538 $1,823,603 - ----------------------------------------------------------------------------------------------------------------------
Geographic Information: DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998 - ------------------------------------------------------------------------------------------------------------------------ LONG-LIVED LONG-LIVED LONG-LIVED REVENUES ASSETS REVENUES/1/ ASSETS REVENUES/1/ ASSETS - ------------------------------------------------------------------------------------------------------------------------ United States $ 750,383 $429,611 $ 809,752 $445,497 $ 999,192 $ 510,482 United Kingdom 204,638 112,149 225,978 123,541 369,713 140,759 Other foreign countries 431,688 123,060 439,331 131,529 524,406 132,799 - ------------------------------------------------------------------------------------------------------------------------ Total $1,386,709 $664,820 $1,475,061 $700,567 $1,893,311 $ 784,040 - ------------------------------------------------------------------------------------------------------------------------
1 Revised to include shipping and handling costs as an item in cost of sales rather than a reduction in revenues. 2 Earnings before interest, taxes, depreciation and amortization and nonrecurring/unusual charges. Intersegment sales and related receivables for each of the years shown were immaterial and have been eliminated. For normal management reporting, and therefore the above segment information, consolidated interest expense is treated as a Corporate expense because debt, including location, type, currency, etc., is managed on a worldwide basis by the Corporate Treasury Department. NOTE 14: OFF-BALANCE SHEET RISK, CONCENTRATIONS OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS Off-Balance Sheet Risk At December 31, 2000, the Company was contingently liable with respect to approximately $42,077,000 ($33,447,000 at December 31, 1999) of standby letters of credit ("letters") issued in connection with the delivery, installation and performance of the Company's products under contracts with customers throughout the world. Of the outstanding total, approximately 76% relates to Cameron. The Company was also liable for approximately $13,169,000 of bank guarantees and letters of credit used to secure certain financial obligations of the Company ($24,991,000 at December 31, 1999). While certain of the letters do not have a fixed expiration date, the majority expire within the next one to two years and the Company would expect to issue new or extend existing letters in the normal course of business. Except for certain financial instruments as described below, the Company's other off-balance sheet risks are not material. Concentrations of Credit Risk Apart from its normal exposure to its customers, who are predominantly in the energy industry, the Company had no significant concentrations of credit risk at December 31, 2000. Fair Value of Financial Instruments The Company's financial instruments consist primarily of cash and cash equivalents, trade receivables, trade payables, debt instruments, interest rate swap contracts and foreign currency forward contracts. The book values of cash and cash equivalents, trade receivables and trade payables and floating-rate debt instruments are considered to be representative of their respective fair values. Based on the spread between the contract forward rate and the spot rate as of year-end on contracts with similar terms to existing contracts, the fair value associated with the Company's foreign currency forward contracts was approximately $213,000 higher than nominal value at December 31, 2000.
NOTE 15: SUMMARY OF NONCASH INVESTING AND FINANCING ACTIVITIES Increase in net assets: YEARS ENDED DECEMBER 31, - ------------------------------------------------------------------------------------------------- (dollars in thousands) 2000 1999 - ------------------------------------------------------------------------------------------------- Common stock issued for employee stock ownership and other plans $ 3,954 $7,425 Tax benefit of certain employee stock benefit plan transactions 59,624 5,693 Other -- 534
NOTE 16: EARNINGS PER SHARE The weighted average number of common shares (utilized for basic earnings per share presentation) and common stock equivalents outstanding for each period presented was as follows:
YEARS ENDED DECEMBER 31, - ---------------------------------------------------------------------------------------------- (amounts in thousands) 2000 1999 1998 - ---------------------------------------------------------------------------------------------- Average shares outstanding 52,800 53,328 52,857 Common stock equivalents 2,213 1,520 2,045 - ---------------------------------------------------------------------------------------------- Shares utilized in diluted earnings per share presentation 55,013 54,848 54,902 - ----------------------------------------------------------------------------------------------
NOTE 17: ACCUMULATED OTHER ELEMENTS OF COMPREHENSIVE INCOME DECEMBER 31, - ----------------------------------------------------------------------------------------- (dollars in thousands) 2000 1999 - ----------------------------------------------------------------------------------------- Accumulated foreign currency translation loss $(36,964) $(11,651) Accumulated adjustments to record minimum pension liabilities (388) (388) Other 247 -- - ----------------------------------------------------------------------------------------- $(37,105) $(12,039) - -----------------------------------------------------------------------------------------
NOTE 18: UNAUDITED QUARTERLY OPERATING RESULTS
2000 (BY QUARTER)/3/ - ----------------------------------------------------------------------------------------------- (dollars in thousands, except per share data) 1 2 3 4 - ----------------------------------------------------------------------------------------------- Revenues/1/ $338,302 $349,993 $349,978 $348,436 Gross margin/2/ 97,664 103,156 103,285 107,807 Net income (loss) 12,665 16,197 8,352 (9,554) Earnings (loss) per share: Basic .25 .31 .16 (.18) Diluted .24 .29 .15 (.18)
1999 (BY QUARTER)/3/ - ----------------------------------------------------------------------------------------------- (dollars in thousands, except per share data) 1 2 3 4 - ----------------------------------------------------------------------------------------------- Revenues/1/ $385,776 $387,990 $376,860 $324,435 Gross margin/2/ 103,921 99,268 98,751 96,845 Net income 10,762 9,129 15,928 7,183 Earnings per share: Basic .20 .17 .30 .14 Diluted .20 .17 .29 .13
1 Revised to include shipping and handling costs as an item in cost of sales rather than a reduction in revenues. 2 Gross margin equals revenues less cost of sales before depreciation and amortization. 3 See Note 2 of the Notes to Consolidated Financial Statements for further information relating to nonrecurring/unusual charges incurred during 2000 and 1999. SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF COOPER CAMERON CORPORATION The following table sets forth selected historical financial data for the Company for each of the five years in the period ended December 31, 2000. This information should be read in conjunction with the consolidated financial statements of the Company and notes thereto included elsewhere in this Annual Report.
YEARS ENDED DECEMBER 31, - ------------------------------------------------------------------------------------------------------------------- (dollars in thousands, except per share) 2000 1999 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------- Income Statement Data: Revenues/1/ $1,386,709 $1,475,061 $1,893,311 $1,817,132 $1,395,223 - ------------------------------------------------------------------------------------------------------------------- Costs and expenses: Cost of sales (exclusive of depreciation and amortization)/1/ 974,797 1,076,276 1,340,722 1,307,970 1,017,594 Depreciation and amortization 75,321 83,716 72,474 65,862 62,480 Selling and administrative expenses 197,381 205,734 229,710 215,331 194,983 Interest expense 18,038 27,834 32,721 28,591 20,878 Nonrecurring/unusual charges/2/ 77,399 10,585 21,956 -- 7,274 1,342,936 1,404,145 1,697,583 1,617,754 1,303,209 - ------------------------------------------------------------------------------------------------------------------- Income before income taxes 43,773 70,916 195,728 199,378 92,014 Income tax provision (16,113) (27,914) (59,572) (58,796) (27,830) - ------------------------------------------------------------------------------------------------------------------- Net income $ 27,660 $ 43,002 $ 136,156 $ 140,582 $ 64,184 - ------------------------------------------------------------------------------------------------------------------- Earnings per share: Basic $.52 $.81 $2.58 $2.70 $1.27 Diluted $.50 $.78 $2.48 $2.53 $1.21 - ------------------------------------------------------------------------------------------------------------------- Balance Sheet Data (at the end of period): Total assets $1,493,873 $1,470,719 $1,823,603 $1,643,230 $1,468,922 Stockholders' equity 842,279 714,078 780,285 642,051 516,128 Long-term debt 188,060 195,860 364,363 328,824 347,548 Other long-term obligations 117,503 138,955 149,113 143,560 160,405
1 Revised to include shipping and handling costs as an item in cost of sales rather than a reduction in revenues. 2 See Note 2 of the Notes to Consolidated Financial Statements for further information relating to the nonrecurring/unusual charges incurred during 2000, 1999 and 1998. Information relating to the nonrecurring/unusual charges incurred during 1996 may be found in the 1996 Annual Report to Stockholders. EX-21 5 0005.txt LIST OF SUBSIDIARIES EXHIBIT 21.1 COOPER CAMERON CORPORATION -- SUBSIDIARIES & JOINT VENTURES (AS OF MARCH 23, 2001)
STATE/COUNTRY OF % OWNED % OWNED INCORPORATION OR COOPER CAMERON CORPORATION (DELAWARE) -- PARENT BY SUBSIDIARY BY CCC ORGANIZATION - ----------------------------------------------- ------------- -------- ---------------- Cameron Algerie (1 share owned by CCPEG)/1/ 100% Algeria Cameron Argentina S.A.I.C./1/ 100% Argentina Cameron Australasia Pty. Ltd. 100% Australia Cooper Cameron Pensions Australia. Pty. Ltd. 100% Australia Cameron France, S.A. (6 shares owned by directors) 100% France Cameron France E.U.R.L. 100% France Cameron France S.N.C.3 100% France Cameron Gabon, S.A. (7 shares owned by directors) 100% Gabon Cameron GmbH 100% Germany Cameron Services Middle East LLC (Joint Venture)/6/ 24% Oman Cameron Ireland Limited (1 share owned by CCPEG)/1/ 100% Ireland Cameron Norge AS 100% Norway Cameron Venezolana, S.A./1/ 100% Venezuela Cameron Remanufacturer 100% Venezuela Camercay, Ltd. 100% Grand Cayman Compression Services Company 100% Ohio Cooper Cameron do Brasil Ltda. (1 share owned by CCPEG)/1/ 100% Brazil Cooper Cameron Foreign Sales Company Ltd. 100% Barbados Cooper Cameron (U.K.) Limited 100% United Kingdom Cameron Offshore Engineering Limited 100% United Kingdom Cooper Cameron Pensions Limited 100% United Kingdom Cameron Integrated Services Limited 100% United Kingdom Cooper Cameron Holding B.V. 100% Netherlands Cooper Energy Services B.V. 100% Netherlands Cameron B.V. 100% Netherlands Cooper Cameron Limited 100% Canada Cooper Cameron Corporation Nigeria Limited/4/ 60% Nigeria Cooper Energy Services de Venezuela, S.A. 100% Venezuela Cooper Energy Services International, Inc. 100% Ohio Canada Tiefbohrgerate und Maschinenfabrik GmbH 100% Austria (1 share owned by CCPEG)/1/ Cooper Cameron (Singapore) Pte. Ltd. 39% 61% Singapore Cameron (B) Sendirian Berhad (except 1 share owned by Lai Yue Kee) 100% Brunei Cooper Cameron de Mexico S.A. de C.V. (1 share owned by CCPEG)/1/ 100% Mexico Cooper Cameron Petroleum Equipment Group, Inc. 100% Delaware Cooper Flow Control Australia Pty. Ltd. 50% 50% Australia Cooper Turbocompressor, Inc. (Delaware) 100% Delaware Ingram Cactus de Venezuela , S.A. (Venezuela Joint Venture)/2/ 49% Venezuela Cameron Cactus Cayman Ltd. (Grand Cayman) 100% Grand Cayman Lyulka-Cooper (Russian Federation Joint Venture)/8/ 50% Russia Orbit Valve International, Inc. (Arkansas) 100% Arkansas Orbit Valve Company (Arkansas) 100% Arkansas Orbit Valve Asia, Inc. (Arkansas) 100% Arkansas Orbit Valve Company Europe (Arkansas) 100% Arkansas Orbit Valve PLC (U.K.) 100% United Kingdom Orbit Valve Canada Ltd. (Alberta, Canada) 100% Alberta, Canada Wellhead Holdings Malaysia, Inc. (Nevada) 100% Nevada Cooper Cameron (Malaysia) Sdn Bhd 100% Malaysia
1 Partially owned by Cooper Petroleum Equipment Group, Inc. 4 Partially owned by various Nigerian entities and individuals. 2 Partially owned by Carmelo Antonio Moschella Carnabuci. 5 Partially owned by Lyulka-Saturn. 3 Partially owned by Cameron France E.U.R.L 6 Partially owned by United Engineering Services LLC.
EX-23.1 6 0006.txt ERNST & YOUNG CONSENT EXHIBIT 23.1 Consent of Independent Auditors ------------------------------- We consent to the incorporation by reference in this Annual Report (Form 10-K) of Cooper Cameron Corporation of our report dated January 30, 2001, included in the 2000 Annual Report to Stockholders of Cooper Cameron Corporation. We also consent to the incorporation by reference in the following Registration Statements on Forms S-8 or Form S-3 of Cooper Cameron Corporation of our report dated January 30, 2001, with respect to the consolidated financial statements incorporated herein by reference in the Annual Report (Form 10-K) for the year ended December 31, 2000. Registration Statement No. Purpose - ------------- ------- No. 333-26923 and Form S-8 Registration Statement pertaining to the No. 33-95004 Amended and Restated Cooper Cameron Corporation Long-Term Incentive Plan No. 33-94948 Form S-8 Registration Statement pertaining to the Cooper Cameron Corporation Employee Stock Purchase Plan No. 33-95000 Form S-8 Registration Statement pertaining to the Cooper Cameron Corporation Amended and Restated 1995 Stock Option Plan for Non-Employee Directors No. 33-95002 Form S-8 Registration Statement pertaining to the Cooper Cameron Corporation Retirement Savings Plan No. 333-58005 Form S-8 Registration Statement pertaining to the Individual Account Retirement Plan for Hourly-Paid Employees at the Cooper Cameron Corporation Mount Vernon Plant No. 333-57995 Form S-8 Registration Statement pertaining to the Individual Account Retirement Plan for Bargaining Unit Employees at the Cooper Cameron Corporation Missouri City, Texas Facility No. 333-57991 Form S-8 Registration Statement pertaining to the Individual Account Retirement Plan for Bargaining Unit Employees at the Cooper Cameron Corporation Buffalo, New York Plant No. 333-57997 Form S-8 Registration Statement pertaining to the Individual Account Retirement Plan for Cooper Cameron Corporation Hourly Employees, UAW, at the Superior Plant No. 333-58001 Form S-8 Registration Statement pertaining to the Individual Account Retirement Plan for Cooper Cameron Corporation Hourly Employees, IAM, at the Superior Plant No. 333-58003 Form S-8 Registration Statement pertaining to the Individual Account Retirement Plan for Bargaining Unit Employees at the Cooper Cameron Corporation Grove City Facility No. 333-53545 Form S-8 Registration Statement pertaining to the Amended and Restated Cooper Cameron Corporation Long- Term Incentive Plan No. 333-51705 Form S-3 Registration Statement pertaining to the Cooper Cameron Corporation shelf registration of debt securities No. 333-77641 Form S-8 Registration Statement pertaining to the Cooper Cameron Corporation Savings-Investment Plan for Hourly Employees No. 333-79787 Form S-8 Registration Statement pertaining to the Cooper Cameron Corporation Second Amended and Restated 1995 Stock Option Plan for Non-Employee Directors No. 333-37850 Form S-8 Registration Statement pertaining to the Amended and Restated Cooper Cameron Corporation Long- Term Incentive Plan. No. 333-46638 Form S-8 Registration Statement pertaining to the Cooper Cameron Corporation Broad Based 2000 Incentive Plan. /s/ Ernst & Young LLP ERNST & YOUNG LLP Houston, Texas March 23, 2001 -----END PRIVACY-ENHANCED MESSAGE-----