<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended June 30, 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 in its Charter)
Delaware 76-0451843
--------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
515 Post Oak Blvd., Suite 1200, Houston, Texas 77027
--------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
713/513-3300
--------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
N/A
--------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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 the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--------- ----------
Number of shares outstanding of issuer's common stock as of July 31, 2000 was
53,041,663.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
COOPER CAMERON CORPORATION
CONSOLIDATED RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
---------------- -----------------
(dollars in millions, except per share data) 2000 1999 2000 1999
------- ------- -------- -------
<S> <C> <C> <C> <C>
REVENUES................................... $348.0 $385.0 $684.5 $769.0
------ ------ ------ ------
COSTS AND EXPENSES
Cost of sales (exclusive of depreciation
and amortization)...................... 244.8 285.7 483.7 565.8
Depreciation and amortization.............. 18.8 21.2 38.2 42.1
Selling and administrative expenses........ 51.8 51.0 102.1 104.6
Interest expense........................... 4.3 7.5 8.9 14.8
Nonrecurring/unusual charges............... 5.1 5.8 10.1 12.0
------ ------ ------ ------
324.8 371.2 643.0 739.3
------ ------ ------ ------
Income before income taxes......... 23.2 13.8 41.5 29.7
Income tax provision....................... (7.0) (4.7) (12.6) (9.8)
------ ------ ------ ------
Net income................................. $ 16.2 $ 9.1 $ 28.9 $ 19.9
====== ====== ====== ======
Earnings per share:
Basic.................................. $ 0.31 $ 0.17 $ 0.56 $ 0.37
====== ====== ====== ======
Diluted................................ $ 0.29 $ 0.17 $ 0.53 $ 0.36
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
-2-
<PAGE>
COOPER CAMERON CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
(dollars in millions, except shares and per share data) 2000 1999
-------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................... $ 13.3 $ 8.2
Receivables, net.................................................... 240.2 271.5
Inventories, net.................................................... 401.1 400.0
Other............................................................... 48.4 24.8
-------- --------
Total current assets..................................... 703.0 704.5
-------- --------
Plant and equipment, at cost........................................ 810.6 812.2
Less: accumulated depreciation..................................... (405.7) (392.6)
Intangibles......................................................... 502.9 508.8
Less: accumulated amortization..................................... (231.3) (227.8)
Other assets........................................................ 97.4 65.6
-------- --------
TOTAL ASSETS........................................ $1,476.9 $1,470.7
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturities of long-term debt................................ $ 4.2 $ 14.4
Accounts payable and accrued liabilities............................ 329.9 395.0
Accrued income taxes................................................ 10.8 12.4
-------- --------
Total current liabilities................................ 344.9 421.8
-------- --------
Long-term debt...................................................... 198.3 195.9
Postretirement benefits other than pensions......................... 56.0 60.8
Deferred income taxes............................................... 38.8 38.9
Other long-term liabilities......................................... 34.5 39.2
-------- --------
Total liabilities........................................ 672.5 756.6
-------- --------
Stockholders' Equity:
Common stock, par value $.01 per share, 150,000,000 shares
authorized, 54,001,955 shares issued (54,001,507 at
December 31, 1999).......................................... 0.5 0.5
Capital in excess of par value.................................. 918.4 900.0
Retained deficit................................................ (49.4) (78.3)
Accumulated other elements of comprehensive income.............. (37.6) (12.0)
Less: Treasury stock - 984,894 shares, at cost (3,433,548 at
December 31, 1999).......................................... (27.5) (96.1)
-------- --------
Total stockholders' equity............................... 804.4 714.1
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY......................................... $1,476.9 $1,470.7
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
COOPER CAMERON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
---------------- ------------------
(dollars in millions) 2000 1999 2000 1999
------ ------ ------- -------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................. $ 16.2 $ 9.1 $ 28.9 $ 19.9
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation........................................ 14.9 16.2 30.6 32.2
Amortization........................................ 3.9 5.0 7.6 9.9
Deferred taxes and other............................ 4.4 (7.2) 3.9 (11.3)
Changes in assets and liabilities, net of translation,
acquisitions and non-cash items:
Receivables......................................... 26.0 26.6 27.2 47.4
Inventories......................................... (4.4) 34.9 (7.4) 61.2
Accounts payable and accrued liabilities............ (27.9) (27.3) (59.2) (64.4)
Other assets and liabilities, net................... (14.2) (7.8) (28.8) (20.5)
------ ------ ------ ------
Net cash provided by operating activities... 18.9 49.5 2.8 74.4
------ ------ ------ ------
Cash flows from investing activities:
Capital expenditures........................................ (13.8) (17.5) (23.5) (44.6)
Acquisitions................................................ -- -- (4.2) --
Other....................................................... 10.0 0.5 (0.9) 2.1
------ ------ ------ ------
Net cash used for investing activities...... (3.8) (17.0) (28.6) (42.5)
------ ------ ------ ------
Cash flows from financing activities:
Loan borrowings (repayments), net........................... (32.2) (37.3) (6.7) (37.7)
Activity under stock option plans and other................. 21.5 (1.6) 42.4 (4.2)
------ ------ ------ ------
Net cash provided by (used for)
financing activities.................... (10.7) (38.9) 35.7 (41.9)
------ ------ ------ ------
Effect of translation on cash................................... (3.1) 2.4 (4.8) 1.2
------ ------ ------ ------
Increase (decrease) in cash and cash equivalents................ 1.3 (4.0) 5.1 (8.8)
------ ------ ------ ------
Cash and cash equivalents, beginning of period.................. 12.0 16.5 8.2 21.3
------ ------ ------ ------
Cash and cash equivalents, end of period........................ $ 13.3 $ 12.5 $ 13.3 $ 12.5
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
COOPER CAMERON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Adjustments
The financial information presented as of June 30, 2000, and for the three-
and six-month periods ended June 30, 2000 and 1999, has been prepared from the
books and records without audit. Financial information as of December 31, 1999,
as used herein, has been derived from the audited financial statements of the
Company, but does not include all disclosures required by generally accepted
accounting principles. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial information for the periods indicated, have been
included. For information regarding the Company's accounting policies, refer to
the consolidated financial statements and related notes included in the
Company's Annual Report to Stockholders for the year ended December 31, 1999.
Note 2. Revenue Recognition
At the end of 1999, the United States Securities and Exchange Commission (SEC)
issued Staff Accounting Bulletin No. 101, setting forth the Staff's views
regarding various revenue recognition issues. The Company has reviewed this
release, which is required to be implemented by the fourth quarter of 2000, and
does not currently believe that any material changes are required in its current
revenue recognition policies, practices or procedures. Because the Staff
directly, by written communication, and indirectly, by its dealings with other
SEC registrants, is continuing to clarify these requirements, the Company will
continue its evaluation and make any changes that may ultimately be required.
Note 3. Nonrecurring/unusual charges
The nonrecurring/unusual charges by segment are as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
------------- --------------
(dollars in millions) 2000 1999 2000 1999
----- ----- ----- -----
<S> <C> <C> <C> <C>
Cameron........................ $ 1.1 $ 2.8 $ 1.2 $ 4.4
Cooper Cameron Valves (CCV).... -- 1.0 .9 4.1
Cooper Energy Services (CES)... 4.0 2.0 7.8 3.3
Cooper Turbocompressor (CTC)... -- -- 0.2 0.2
----- ----- ----- -----
$ 5.1 $ 5.8 $10.1 $12.0
===== ===== ===== =====
</TABLE>
The Company's nonrecurring/unusual charges for the second quarter of 2000,
as well as for the six months ended June 30, 2000, represent current period
recognition of costs related to actions initiated in prior periods. Over three-
fourths of the second quarter and year-to-date charges were incurred by CES and
primarily relate to: the shutdown of the Company's
-5-
<PAGE>
underutilized foundry and associated machining operations in Grove City,
Pennsylvania, the relocation of production equipment from its compressor plant
in Mt. Vernon, Ohio, as well as costs associated with relocation of the
Reciprocating turbocharger and Ajax compressor product lines and the
consolidation of this segment's aftermarket operations. All of these actions
were commenced in 1999. Other charges include employee severance and various
continuing facility closure costs.
For the six months ended June 30, 1999, Cameron and CTC incurred
approximately $4.6 million, primarily for employee severance, including
employees notified in connection with the Company's second quarter 1999 decision
to close its Austrian manufacturing facility, which was a part of Cameron's 1996
acquisition of Ingram Cactus. CCV incurred approximately $4.1 million in costs
related primarily to the shut-down of its Missouri City, Texas manufacturing
facility and the transfer of that location's production to another facility, as
well as additional one-time acquisition costs relating to the 1998 purchase of
Orbit Valve International, Inc. Finally, approximately $3.3 million of costs
relating to the ongoing realignment of CES manufacturing facilities, as well as
employee severance associated with the closure of a small facility in Europe,
were recorded during the year-to-date period.
Note 4. Segments
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
------------------ ------------------
(dollars in millions) 2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
---------
Cameron....................... $215.2 $211.6 $421.7 $439.2
CCV........................... 55.8 58.7 105.0 112.8
CES........................... 51.9 84.2 109.6 161.9
CTC........................... 25.1 30.5 48.2 55.1
------ ------ ------ ------
$348.0 $385.0 $684.5 $769.0
====== ====== ====== ======
Income (loss) before taxes:
---------------------------
Cameron....................... $ 24.0 $ 23.3 $ 48.4 $ 54.9
CCV........................... 6.8 3.3 9.2 3.2
CES........................... (2.5) (7.0) (5.9) (16.0)
CTC........................... 3.4 5.4 6.8 9.0
Corporate & Other/(1)/........ (8.5) (11.2) (17.0) (21.4)
------ ------ ------ ------
$ 23.2 $ 13.8 $ 41.5 $ 29.7
====== ====== ====== ======
</TABLE>
/(1)/ Corporate & Other includes expenses associated with the Company's
Corporate office in Houston, Texas as well as all of the Company's
interest expense.
-6-
<PAGE>
Note 5. Inventories
<TABLE>
<CAPTION>
June 30, December 31,
(dollars in millions) 2000 1999
-------- ------------
<S> <C> <C>
Raw materials....................................... $ 42.6 $ 43.9
Work-in-process..................................... 134.6 126.9
Finished goods, including parts and subassemblies... 294.0 301.9
Perishable tooling and supplies..................... 2.5 2.7
------ ------
473.7 475.4
Allowances.......................................... (72.6) (75.4)
------ ------
Net inventories..................................... $401.1 $400.0
====== ======
</TABLE>
Note 6. Retained Deficit
While the Company has a retained deficit, it is able to declare and pay
dividends 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 June 30, 2000,
the Company had approximately $869.0 million from which dividends could be paid.
Note 7. Comprehensive Income
The amount of comprehensive income for each of the three- and six-month
periods ended June 30, 2000 and 1999, and the components of accumulated other
elements of comprehensive income at June 30, 2000 and December 31, 1999, are as
follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
------------------ ------------------
(dollars in millions) 2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net income per Consolidated Results of
Operations........................... $ 16.2 $ 9.1 $ 28.9 $ 19.9
Foreign currency translation loss/(1)/... (16.7) (11.9) (27.1) (32.9)
Other.................................... (0.4) -- 1.5 --
------ ------ ------ ------
Comprehensive income (loss).............. $ (0.9) $ (2.8) $ 3.3 $(13.0)
====== ====== ====== ======
</TABLE>
/(1)/ The significant second quarter and year-to-date changes in the "Foreign
currency translation loss" relate primarily to the Company's operations in
the United Kingdom, France and Germany.
-7-
<PAGE>
<TABLE>
<CAPTION>
June 30, December 31,
(dollars in millions) 2000 1999
------ ------
<S> <C> <C>
Amounts comprising accumulated other elements
of comprehensive income:
Accumulated foreign currency translation
adjustments............................ $(38.7) $(11.6)
Accumulated adjustments to record
minimum pension liabilities............ (0.4) (0.4)
Other...................................... 1.5 --
------ ------
Accumulated other elements of
comprehensive income........... $(37.6) $(12.0)
====== ======
</TABLE>
Note 8. Earnings Per Share
The weighted average number of common shares (utilized for the basic
earnings per share presentation) and common stock equivalents outstanding for
each period presented were as follows:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
--------------- ---------------
(amounts in millions) 2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average shares outstanding.......................... 52.7 53.3 51.9 53.3
Common stock equivalents............................ 2.5 1.7 2.6 1.3
---- ---- ---- ----
Number of shares utilized in diluted earnings per
share calculation............................... 55.2 55.0 54.5 54.6
==== ==== ==== ====
</TABLE>
-8-
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
In addition to the historical data contained herein, this document includes
"forward-looking statements" that are based on current expectations, estimates
and projections regarding the future revenues, cash flows including capital
expenditures, nonrecurring/unusual charges, and profitability of the Company, as
well as expectations regarding savings from future restructuring activities.
All such forward-looking statements are 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 risks and uncertainties,
not under the control of the Company, which can affect the Company's results of
operations, liquidity or financial condition. Such risks and uncertainties can
include overall demand for the Company's products; 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; as a result, changes in price expectations can lead to
changes in the Company's financial results.
Because the information herein is based solely on data currently available,
it is subject to change as a result of changes in conditions such as those
described above, 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.
SECOND QUARTER 2000 COMPARED TO SECOND QUARTER 1999
Cooper Cameron Corporation had net income of $16.2 million, or $.29 per
share, for the second quarter of 2000, compared to $9.1 million, or $.17 per
share, for the same period in 1999. Included in the second quarter 2000 results
were after-tax charges of $3.6 million ($5.1 million pre-tax), or $.07 per
share, primarily for previously initiated cost rationalization programs in
Cooper Energy Services (CES). The second quarter of 1999 included similar
after-tax charges of $3.8 million ($5.8 million pre-tax), or $.07 per share.
See Note 3 of the Notes to Consolidated Financial Statements for further
information regarding the nonrecurring/unusual charges. Excluding these
nonrecurring/unusual charges, the Company earned $.36 per share in the second
quarter of 2000 compared to $.24 per share in the second quarter of 1999.
REVENUES
Revenues for the second quarter of 2000 totaled $348.0 million, a decrease
of 10% from the $385.0 million for the same period in 1999, with an increase in
Cameron and declines in the other three segments. Excluding the second quarter
1999 revenues for the CES rotating
-9-
<PAGE>
compressor business, which was sold to Rolls-Royce plc on September 30, 1999,
second quarter 2000 revenues declined by 2% from the prior year level.
Revenues for Cameron totaled $215.2 million, an increase of 2% from second
quarter 1999 revenues of $211.6 million, with an increase in subsea products and
declines in drilling and surface products. Subsea products increased due to
major projects in the Philippines, West Africa, and the North Sea. The most
significant decline was in drilling products, particularly subsea blowout
preventers and controls for deep-water projects in the Gulf of Mexico and North
Sea. Surface products also declined, as weakness in international markets was
only partially offset by increases in the North American business. On a
geographical basis, the Eastern and Western Hemispheres declined, while Asia-
Pacific increased. The most significant decline was in Eastern Hemisphere,
where weakness was evident throughout the region, particularly in the North Sea
drilling project business. Western Hemisphere also declined, as improved
surface products and aftermarket activity could not completely offset the weaker
Gulf of Mexico drilling and subsea project business. The improvement in Asia-
Pacific resulted from a major subsea project for the Philippines.
Cooper Cameron Valves' (CCV) revenues were $55.8 million, a decline of 5%
from the $58.7 million in the second quarter of 1999. The largest decrease was
in Orbit Valve's industrial products due to a lack of major upgrade or new
chemical plant projects. Pipeline valves also declined, as customers continued
to delay placing major project orders. Providing a partial offset were
increases in oilfield distributor products and the aftermarket business, driven
by improvement in North American markets.
Revenues for CES were $51.9 million, a decline of 38% from the $84.2
million in the second quarter of 1999. Excluding the second quarter 1999
revenues of the rotating compressor business, revenues declined by 2%.
Improvement in high margin replacement parts and small integral engine and
compressor packages were offset by weakness in large separable engines and
compressors.
Cooper Turbocompressor (CTC) had revenues of $25.1 million, or a decrease
of 18%, from $30.5 million in the second quarter of 1999, with declines in both
plant air and process air machines. Plant air machines declined from an
unusually high shipment level in the second quarter of 1999, while large air
separation customers continued to delay placing new orders for process air
machines. Providing a partial offset was continued improvement in aftermarket
activity.
COSTS AND EXPENSES
The $37.0 million revenue decrease discussed above combined with a $40.9
million decline in cost of sales (exclusive of depreciation and amortization)
resulted in a gross margin improvement of $3.9 million. The sale of the lower-
margin rotating compressor business, cost reduction programs, and an improvement
in sales mix more than offset continued pricing pressure in all four segments,
such that the gross margin percentage (defined as revenues less cost of sales as
percentage of revenues) improved by 3.9 percentage points. These results are
discussed below in more detail for each segment.
-10-
<PAGE>
Cameron's gross margin percentage was 28.7% in the second quarter of 2000,
unchanged from the same period of 1999. The benefits of various cost reduction
programs, including foreign sourcing of material, staffing reductions, and
capital expenditures for higher efficiency machine tools were offset by
continued pricing pressure in a very competitive market environment. As
Cameron's business improves, this relationship should improve, as the full
benefit of capital enhancements and other cost control initiatives completed
over the last two years are realized.
CCV's gross margin percentage improved from 26.8% in the second quarter of
1999 to 32.0% in the second quarter of 2000. This increase was the result of
cost reductions, including the closure of a high-cost manufacturing facility in
Missouri City, Texas, other staffing reductions, and foreign sourcing of
material. These actions more than offset continued pricing pressure in oilfield
distributor and pipeline valve products.
The gross margin percentage for CES increased from 15.1% in the second
quarter of 1999 to 28.9% in the second quarter of 2000. This improvement was
primarily the result of the sale of the lower-margin rotating compressor
business. Also contributing to the increase were favorable sales mix and
numerous ongoing cost reduction programs, including the closure of a high-cost
foundry and manufacturing facility in Grove City, Pennsylvania, other staffing
reductions, and material sourcing initiatives.
CTC's gross margin percentage improved from 32.9% to 35.0%. The favorable
effect of the increase in higher-margin aftermarket business and decline in
relatively lower-margin process air machine revenues more than offset continued
pricing pressure.
Depreciation and amortization expense decreased by $2.4 million, from $21.2
million in the second quarter of 1999 to $18.8 million in the second quarter of
2000. This decrease was the result of the sale of the rotating compressor
business partially offset by capital spending in Cameron.
Selling and administrative expenses increased by $.8 million, or 2%, from
$51.0 million in the second quarter of 1999 to $51.8 million in the second
quarter of 2000, with a decrease in CES offset by increases in the other three
segments. CES declined by $1.6 million due primarily to the sale of the
rotating compressor business, while the other three segments increased in
response to improving orders and increased bidding activity. Selling and
administrative expense as a percentage of revenue increased from 13.2% in the
second quarter of 1999 to 14.9% in the second quarter of 2000. As volume
increases and further leverage is achieved, this ratio should improve.
Reflecting the various factors discussed above, operating income (defined
as earnings before nonrecurring/unusual charges, corporate expenses, interest
and taxes) totaled $36.8 million, an increase of $6.0 million from the second
quarter of 1999. Cameron decreased from $26.1 million to $25.1 million, CCV
increased from $4.3 million to $6.8 million, CES improved from a loss of $(5.0)
million to $1.5 million, and CTC declined from $5.4 million to $3.4 million.
-11-
<PAGE>
Interest expense was $4.3 million in the second quarter of 2000, a decrease
of $3.2 million from the same period in 1999. This decline was due to a lower
average debt level, attributable primarily to proceeds from the sale of the
rotating compressor business.
The second quarter 2000 effective tax rate of 30.1% compared with 31% in
the first quarter of 2000, reflects the catch-up effect of a reduction from 31%
to 30.5% in the full year estimated 2000 rate. This decline, as well as the
decline from 1999's second quarter rate of 34%, are largely attributable to a
change in the mix of foreign, which carries in certain instances a lower tax
rate, versus domestic earnings, which also include the effect of U.S. state and
local taxes.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
The Company had net income of $28.9 million, or $.53 per share, for the six
months ended June 30, 2000, compared to $19.9 million, or $.36 per share, for
the same period in 1999. Included in the 2000 results were after-tax charges of
$7.0 million ($10.1 million pre-tax), or $.13 per share, primarily for cost
rationalization programs in CES initiated during 1999. The 1999 results
included similar after-tax charges of $8.0 million ($12.0 million pre-tax), or
$.15 per share. See Note 3 of the Notes to Consolidated Financial Statements
for further information regarding the nonrecurring/unusual charges. Excluding
the nonrecurring/unusual charges, the Company earned $.66 per share in the first
six months of 2000 compared to $.51 for the same period of 1999.
REVENUES
Revenues for the six months ended June 30, 2000 totaled $684.5 million, a
decrease of 11% from the $769.0 million in the first six months of 1999, with
declines in all four segments. Excluding the 1999 revenues for the CES rotating
compressor business, which was sold in the third quarter of 1999, revenues
declined by 3% from the prior year level.
Revenues for Cameron totaled $421.7 million, a decrease of 4% from the
first half 1999 revenues of $439.2 million. As discussed in the quarter-to-
quarter comparison, revenues declined in drilling and surface products, while
subsea products increased. On a geographical basis, revenues declined in the
Eastern and Western Hemispheres, while Asia-Pacific increased.
CCV's revenues of $105.0 million declined by 7% from the $112.8 million in
the first six months of 1999. Pipeline valves and Orbit's industrial valves
decreased, while distributor products and aftermarket improved.
Revenues for CES of $109.6 million declined by 32% from the $161.9 million
in the six months ended June 30, 1999. Excluding the 1999 revenues of the
rotating compressor business, revenues increased by 9% in 2000.
-12-
<PAGE>
CTC had revenues of $48.2 million, a decrease of 13%, from $55.1 million in
the first six months of 1999. This decline was in process air machines,
partially offset by improvement in aftermarket activity, with plant air
shipments being virtually unchanged.
For all four segments, the factors that caused the changes described above
are the same as those discussed earlier in the quarterly comparison.
COSTS AND EXPENSES
The $84.5 million revenue decrease discussed above and an $82.1 million
decline in cost of sales (exclusive of depreciation and amortization) resulted
in a gross margin shortfall of $2.4 million. Despite this dollar shortfall, the
gross margin percentage (defined as revenues less cost of sales as a percentage
of revenues) improved by 2.9 percentage points. The sale of the lower-margin
rotating compressor business, cost reduction programs, and an improvement in
sales mix more than offset continued pricing pressure in all four segments.
These results are discussed in more detail for each segment.
Cameron's gross margin percentage was 29.1% in the first six months of
2000, compared to 29.6% for the same period of 1999. This decrease resulted
primarily from continued pricing pressure, partially offset by the benefits of
the various cost reduction programs discussed in the quarterly comparison.
CCV's gross margin percentage improved from 27.5% in the first six months
of 1999 to 31.2% in the six months ended June 30, 2000. This increase was
caused by the same factors discussed in the quarter-to-quarter discussion.
The gross margin for CES increased from 14.5% in the first six months of
1999 to 26.1% in the same period of 2000, with the same factors discussed in the
quarterly comparison affecting the results for the six-month period.
CTC's gross margin percentage improved from 34.0% to 35.3% due to the same
factors discussed in the quarterly comparison.
Depreciation and amortization expense decreased by $3.9 million, from $42.1
million in the six-month period ended June 30, 1999 to $38.2 million in the same
period of 2000. This decline was due to the sale of the rotating compressor
business, partially offset by capital spending in Cameron.
Selling and administrative expenses decreased by $2.5 million, or 2%, from
$104.6 million in the first half of 1999 to $102.1 million in the first six
months of 2000. This decline was largely due to the sale of the rotating
compressor business in CES.
Reflecting the various factors discussed above, operating income (defined
as earnings before nonrecurring/unusual charges, corporate expenses, interest
and taxes) totaled $68.6 million, an increase of $5.5 million from the first six
months of 1999. Cameron decreased from $59.3 million to $49.6 million, CCV
increased from $7.3 million to $10.1 million, CES
-13-
<PAGE>
improved from a loss of $(12.7) million to $1.9 million, and CTC declined from
$9.2 million to $7.0 million.
Interest expense was $8.9 million in the six months ended June 30, 2000, a
decrease of $5.9 million from the same period in 1999. This decline was due to
a lower average debt level, primarily attributable to proceeds from the sale of
the rotating compressor business.
The estimated effective tax rate decreased from 33.0% in the first six
months of 1999 to 30.5% for the same period of 2000, reflecting the same factors
discussed in the quarterly comparison.
OUTLOOK FOR THE REMAINDER OF 2000
Based on current expectations, the Company's sequential improvement in
quarterly earnings during the year should continue in the third quarter, with
earnings per share, excluding nonrecurring/unusual charges, on track toward the
$1.50 to $1.60 range for full year 2000.
CASH FLOW, LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION
During the first six months of 2000, the Company generated approximately $3
million in cash from operating activities, compared to $74 million for the same
period last year. During the first six months of 1999, the Company's
inventories declined significantly ($61.2 million) as orders and backlog
diminished when customers reduced spending in response to low oil prices. With
improving market fundamentals leading to higher order levels in the first six
months of 2000, principally in Cameron, the trend has begun to reverse, with the
Company's inventory levels increasing slightly from December 31, 1999.
The Company spent over $23 million for capital additions during the six
months ended June 30, 2000, over one-half of which was spent by Cameron and CCV.
This level is approximately one-half of the prior year spending level,
reflecting a continuation of significant capital spending cutbacks made in the
middle of last year. Assuming that orders continue to improve, capital spending
will accelerate in the second half of 2000. In addition, CCV utilized
approximately $4 million of cash for a product line acquisition during the first
quarter of 2000.
Most of the Company's cash requirements during the first six months of this
year were financed from nearly $46 million of proceeds received from stock
option exercises. The high level of exercises resulted from a significant
increase in the Company's stock price beginning in February. The Company
utilized excess funds to reduce its borrowing levels, primarily during the
second quarter of the year.
-14-
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no significant changes since December 31, 1999 in the
Company's exposure to market risk from its current holdings of financial
instruments other than the expiration, effective June 30, 2000, of its
outstanding pay fixed/receive variable interest rate swaps covering $75 million
of variable rate debt. The average fixed pay rate on these swaps was 5.77%.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of the Company was held in Houston, Texas
on May 11, 2000 for the purpose of (i) electing three members of the Board of
Directors, (ii) approving the Company's Amended and Restated Management
Incentive Compensation Plan (MICP), and (iii) approving an amendment to the
Company's Amended and Restated Long-Term Incentive Plan (LTIP). Proxies for the
meeting were solicited pursuant to Regulation 14 of the Securities Exchange Act
of 1934 and there was no solicitation in opposition to management's
solicitation. Stockholders approved all of management's nominees to the Board
and approved both the MICP and the LTIP amendment by the following votes:
<TABLE>
<CAPTION>
Board Nominees
------------------------------------
Nathan M. C. Baker Sheldon R. Amendment
Avery Cunningham Erikson MICP to LTIP
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Shares "For" 47,296,895 47,297,884 47,297,441 47,018,186 28,476,782
Shares "Against" - 0 - - 0 - - 0 - 305,268 18,846,041
Shares "Abstaining" - 0 - - 0 - - 0 - 27,004 27,635
Shares "Withheld" 53,563 52,574 53,017 - 0 - - 0 -
Broker Non-Votes - 0 - - 0 - - 0 - - 0 - - 0 -
</TABLE>
-15-
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 - Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended
June 30, 2000.
Signatures
Pursuant to the requirements 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.
Cooper Cameron Corporation
---------------------------
(Registrant)
Date August 9, 2000 /s/ Thomas R. Hix
-------------- -------------------------
Thomas R. Hix
Senior Vice President &
Chief Financial Officer
and authorized to sign on
behalf of the Registrant
-16-
