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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________
FORM 10-K
Form 10-K | R | ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007 |
For the Fiscal year ended December 31, 2006
OR
| £ | £TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934
|
______________________
Commission File Number 1-13884
CAMERON INTERNATIONAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware | 76-0451843 |
(State or other jurisdiction of incorporation or organization)organization) | (I.R.S. Employer Identification No.) |
1333 West Loop South | |
1333 West Loop South Suite 1700 | |
Suite 1700 Houston, Texas | 77027 |
Houston, Texas
| 77027
|
(Address of principal executive offices)offices) | (Zip Code) |
| |
Registrant’s telephone number, including area code (713) 513-3300
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class | Name of Each Exchange on Which Registered |
Common Stock, Par Value $0.01 Per Share | New York Stock Exchange |
| |
Junior Participating Preferred Stock | New York Stock Exchange |
Purchase Rights | New York Stock Exchange |
Par Value $0.01 Per Share | |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes R No £
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes £ No R
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.
YesR No £
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 registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. £
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a non-accelerated filer.smaller reporting company. See definitiondefinitions of “accelerated filer and large“large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer R Accelerated filer £Non-accelerated filer £ Smaller reporting company £
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes £No R
The aggregate market value of the Common Stock, par value $0.01 per share, held by non-affiliates of registrant as of June 30, 2006,2007, our most recently completed second fiscal quarter, was approximately $4,527,523,419.$6,624,507,112. 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. The number of shares of Common Stock, par value $.01 per share, outstanding as of February 9, 2007,15, 2008, was 112,530,879.
218,305,027.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of registrant’s Annual Report to Stockholders for the year ended December 31, 20062007 are incorporated by reference into Parts I and II. Portions of the registrant’s 20072008 Proxy Statement for the Annual Meeting of Stockholders to be held May 9, 200714, 2008 are incorporated by reference into Part III.
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At the Annual Meeting of Stockholders of the Company held on May 5, 2006, stockholders voted to change the corporation’s name to Cameron International Corporation (Cameron or the Company). Upon the change in the corporate name, the Company also rebranded its three existing business segments into Drilling & Production Systems (DPS), formerly the Cameron segment; Valves & Measurement (V&M), formerly the Cooper Cameron Valves segment; and Compression Systems (CS), formerly the Cooper Compression segment. For additional business segment information for each of the three years in the period ended December 31, 2006, see Note 14 of the Notes to Consolidated Financial Statements, which Notes are incorporated herein by reference in Part II, Item 8 of this Annual Report on Form 10-K (Notes to Consolidated Financial Statements).
Cameron is a leading international manufacturerprovider of flow equipment products, systems and services to worldwide oil, gas and gas pressure control and separation equipment, including valves, wellheads, controls, chokes, blowout preventers and assembled systems for oil and gas drilling, production and transmission used in onshore, offshore and subsea applications and provides oil and gas separation, metering and flow measurement equipment. Cameron is also a manufacturer of centrifugal air compressors, integral and separable gas compressors and turbochargers.process industries. See “Glossary of Terms” at the end of Item 1 for definitions of certain terms used in this section. Any reference to Cameron, International Corporation, its divisions or business units within this paragraph or elsewhere within this Form 10-K as being a leader, leading provider, leading manufacturer, or having a leading position is based on the amount of equipment installed worldwide and available industry data.
The Company’s operations are organized into three business segments – Drilling & Production Systems (DPS), Valves & Measurement (V&M) and Compression Systems (CS). For additional business segment information for each of the three years in the period ended December 31, 2007, see Note 14 of the Notes to Consolidated Financial Statements, which Notes are incorporated herein by reference in Part II, Item 8 of this Annual Report on Form 10-K.
Cameron’s origin dates back to the mid-1800s 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, Cameron’s predecessors moved into the production of internal combustion engines and gas compressors. Product offerings were added by the Company’s predecessors 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).
Cameron, a Delaware corporation, was incorporated on November 10, 1994. The Company operated as a wholly-owned subsidiary of Cooper Industries, Inc. until June 30, 1995, the effective date of the completion of an exchange offer with Cooper Industries’ stockholders resulting in the Company becoming a separate stand-alone company. The common stock of Cameron trades on the New York Stock Exchange under the symbol “CAM”. The Company’s Internet address is www.c-a-m.comwww.c-a-m.com. General information about Cameron, including its Corporate Governance Principles, charters for the committees of the Company’s board of directors, Standards of Conduct, and Codes of Ethics for Management Personnel, including Senior Financial Officers and Directors, can be found in the Ethics and Governance section of the Company’s website. The Company makes available, free of charge, on its website theits annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended (the Exchange Act) as soon as reasonably practicable after the Company electronically files or furnishes them to the Securities and Exchange Commission (the SEC). Information filed by the Company with the SEC is also available at www.sec.gov or may be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information regarding operations of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.
Since its inception, the Company has completed several acquisitions, including the assets of Ingram Cactus Company in 1996, Orbit Valve International Inc. in 1998, Stewart and Stevenson’s Petroleum Equipment segment and Nutron Industries in 2002, Petreco International Inc. and the PCC Flow Technologies segment of Precision Castparts Corp. (PCC) in 2004, and NuFlo Technologies, Inc. and the On/Off Valve business unit of the Flow Control segment of Dresser, Inc. in 2005. In January 2006, the Company also acquired the assets and liabilities of Caldon, Inc. which added a new ultrasonic measurement product line to the existing flow management product line in the V&M segment. Additionally, during 2007, the Company acquired DES Operations Limited, certain assets of Prime Measurement Products, certain assets and liabilities of Paradigm Services, LP, and the Hydromation Deep Bed Filter product line from Filtra-Systems Company.
Additionally, theThe Company also sold certain of its business operations, including its Wheeling Machine Products division in 1995, a rotating compressor product line in 1999 and certain Canadian aftermarket operations in 2000.
Drilling & Production Systems Segment
DPS is one of the world’s leading providers of systems and equipment used to control pressures, direct flows of oil and gas wells and separate oil and gas from impurities. Its products are employed in a wide variety of operating environments including basic onshore fields, highly complex onshore and offshore environments, deepwater subsea applications and ultra-high temperature geothermal operations.
DPS’s products include surface and subsea drilling and production systems, control systems, blowout preventers (BOPs), drilling and production control systems, oil and gas separation equipment, gate valves, actuators, chokes, wellheads, drilling riser and aftermarket parts and services. DPS’s products are marketed under the brand names CAMERON®, W-K-M®, MCEVOY® and WILLIS®. Additionally, DPS manufactures elastomers, which are used in pressure and flow control equipment and other petroleum industry applications, as well as in the petroleum, petrochemical, rubber molding and plastics industries.
DPS is one of the leading global suppliers of integrated drilling systems for land, offshore, platform and subsea applications. Drilling equipment designed and manufactured by DPS includes ram and annular BOPs, drilling risers, drilling valves, choke and kill manifolds, surface and subsea BOP control systems, multiplexed electro-hydraulic (MUX) control systems and diverter systems. DPS also provides services under CAMCHEC™, an inspection system that allows drilling contractors to inspect drilling riser on their rigs offline, saving time and money on maintenance and unnecessary transportation.
With oil and gas prices at historical highs, and with world oil demand expected to continue to grow, demandAlthough the pace of orders for new deepwater drilling rigs ledmoderated in 2007 from the record levels of 2006, as did orders for jackups and land rigs, DPS still had the second largest bookings year ever for its drilling business in 2007. The Company believes it maintained its traditional market share during 2007 and continues to full utilization in most sectors during 2006 with oil companies entering into long-term contracts for available rigs at unprecedented day rates, the reactivation of previously cold-stacked rigs and an escalation in newbuild rig activity. As a result, DPS experienced a record year in bookings for surface and subsea drilling products during 2006, further reinforcing Cameron’s role asbe a primary supplier of BOPsBOP’s and related equipment to the drilling industry. InAs a result of the record high order to meet this increased demand for drilling products,level during the last two years, the Company has increasedupgraded its investment in machine tools for itsexisting manufacturing facilities in Berwick, Louisiana, Beziers, France and Houston, Texas,Berwick, Louisiana, including the developmentaddition of a state-of-the-art riser fabrication and assembly facility in Beziers. The Company also opened a new 48,000-square foot aftermarket facility in Houston during 2007 to provide a full range of machining, welding and testing capabilities.
DPS is also a global market leader in supplying surface production equipment, from conventional to high-pressure, high temperature (HPHT) wellheads and API Christmas trees and chokes used on land or installed on offshore platforms.
The surface business, which has a global base of installed equipment and an aftermarket presence in virtually every major hydrocarbon-producing region around the world, remains the largest revenue contributor to the DPS segment. This business saw increased order levels in 20062007 primarily from most majorcustomers in the European, African and Caspian sea regions, aroundas well as from Asia Pacific and the world.Middle East. In order to further expand its offerings to customers in the European, North African and Russian markets, the Company has started construction on a new facility in Ploiesti, Romania which is expected to begin operations in the third quarter of 2008 and become fully functional in 2009. Also, additional locations are being added or existing facilities are being expanded in 2008 to address expected demand for surface products in the Caspian Sea region, Kazakhstan and in Mexico.
DPS continues to be a leader in providingleading provider of subsea wellheads, Christmas trees, manifolds, and production controls to customers worldwide, from basic tree orders to integrated solutions that require systems engineering and project management as well as installation and aftermarket support. DPS’s Subsea Systems organization, created in 2005, has global responsibility for research and development, engineering, sales, manufacturing, installation and aftermarket support for subsea products and systems, and provides customers with integrated solutions to subsea field development requirements under engineering, procurement and construction contracts.
In order to address capacity needs, improve efficiency and lower manufacturing costs in the subsea product line, the Company began construction in mid-2006 oncompleted a new state-of-the-art subsea manufacturing center in Johor, Malaysia. This $32 million investment includes a state-of-the-art manufacturing, assembly and test plant in Johor, Malaysia in mid-2007. In addition, the Company made various capital investments in its Taubate, Brazil manufacturing facility in 2007 to accommodate increased and is expected to be in operation by the fourth quarter of 2007. Additional investments have been madefuture project business in the Company’s subsea tree production facilitiesBrazilian markets. The Company also made investments in 2007 to expand capacity in its Leeds, EnglandEngland; Onne, Nigeria; and Taubate, Brazil and at the Company’s facility in Celle, Germany where control systems for subsea trees are manufactured.Berwick, Louisiana facilities.
As petroleum exploration activities have increasingly focused on subsea locations, DPS has directed much of its new product development efforts toward this market. DPS’s patented SpoolTree™ horizontal subsea production system, which was introduced in 1993, is used 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, equipment and expense needed to perform such activities.
DPS advanced its tradition of innovation with the introduction in 2004 of an all-electric, direct current powered subsea production system, CameronDC™, which is designed to offer greater reliability and provide substantial cost savings to customers. Following intensive testing and review, the first commercial application of the CameronDC system is expected to be deployed in 2008. In March 2007, Cameron acquired DES Operations Limited, an Aberdeen, Scotland-based supplier of production enhancement technology, and developer of the unique Multiple Application Re-injection System (MARS™), which enables the installation of multiple processing technologies directly onto a subsea completion without disrupting existing flowlines or infrastructure.
DPS’s Flow Control group was formed to focus resources on the choke product line with the goal of enhancing DPS’s performance in this product line. Flow Control manufactures Cameron and Willis brand chokes and Cameron brand actuators for the surface and subsea production and drilling markets as well as drilling choke control panels and surface wellhead safety systems. The Company’s primary choke manufacturing operations are located in Longford, Ireland, and its primary surface gate valve actuator manufacturing operations are located at the Flow Control plant in Houston, Texas.
During 2006, the Flow Control product line was expanded with the addition of the LEDEEN® quarter-turn actuator line, acquired as part of the Dresser On/Off Valve business unit acquisition in late 2005. This product line is manufactured at the Company’s newly acquired facility in Voghera, Italy. Also, during 2006, the surface choke product line was expanded as Flow Control began producing AOPAOP® brand surface chokes in its Houston, Texas facility. These initiatives, along with the introduction of a new generation compact subsea choke, all contributed to order and revenue gains in 2007 for the Flow Control business.
Petreco Processing Systems produces highly engineered equipment, systems and servicesprovides custom-engineered process packages to operators worldwide for separation of oil, gas, water and solids separation.solids. Petreco’s products include electrostatic desalters and dehydrators, hydrocyclones, desanders, floatation equipment,gas flotation systems, processing equipment, gas processing equipment and electrochlorinators. These products are marketed under the brand names PETRECO®, VORTOIL®, KREBS®, UNICEL®, WEMCO®, METROL™, KCC™, DEPURATOR® and BFCC™.
DPS’s worldwide aftermarket service program, CAMSERV™, provides replacement parts for equipment through a comprehensive global network. In recent years, DPS has continued to enhance its aftermarket presence worldwide with new or upgraded facilities in Brazil, Mexico, Angola, Newfoundland, and Onne Port, Nigeria.
DPS’s research center, located in Houston, Texas, has ten specially designed test bays to test and evaluate DPS’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 deepwater environments, and two circulation loops for erosion and flow testing.
DPS primarily markets its 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.
DPS’s primary customers include oil and gas majors, national oil companies, independent producers, engineering and construction companies, drilling contractors, rental companies and geothermal energy producers.
Valves & Measurement Segment
V&M is a leading provider of valves and measurement systems primarily used to control, direct and measure the flow of oil and gas as they are moved from individual wellheads through flow lines, gathering lines and transmission systems to refineries, petrochemical plants and industrial centers for processing. Equipment used in these environments is generally required to meet demanding standards, including API 6D and the American Society of Mechanical Engineers (ASME).
V&M’s products include gate valves, ball valves, butterfly valves, Orbit® valves, double block & bleed valves, plug valves, globe valves, check valves, actuators, chokes and aftermarket parts and services. Measurement products include totalizers, turbine meters, flow computers, chart recorders, ultrasonic flow meters and sampling solutions.systems.
In November 2004, the Company acquired certain businesses of the PCC Flow Technologies segment of Precision Castparts Corporation. Additionally, in November 2005, the Company completed the acquisition of the On/Off Valve business unit of the Flow Control segment of Dresser, Inc., except for a portion of the business which was acquired in January 2006. Efforts to integrate this business, mostly inThese acquisitions significantly expanded the V&M segment, were largely completed byparticularly the end of 2006. The inclusion of this business in the V&M segment, as well as strong market conditions, were the major contributors to the growth in the V&M segment’s orders, revenuesEngineered Valves and profitability in 2006.Distributed Valves product lines.
V&M’s Distributed Valves group manufactures valves which are sold through distributed networks, primarily in North America, for use in oil and gas applications and are marketed under the brand names WKM®, DEMCO®, NUTRON®, TBV®, AOP®,AOP, THORNHILL CRAVER®, TEXSTEAM® and WHEATLEY®.
The Engineered Valves group of V&M provides large-diameter valves for use in natural gas, liquefied natural gas (LNG), crude oil and refined products transmission lines. Products are marketed under the brand names CAMERON®, GROVE®, RING-O® and TOM WHEATLEY®.
V&M’s Processed Valves group provides critical service valves for refinery, chemical and petrochemical processing businesses and for associated storage terminal applications, particularlysuch as liquid products and LNG, through the ORBIT AND GENERAL® valve product lines. Other products include TK® and ENTECH® check valves and WKM® and FOSTER® gate valves.
The Measurement Systems group of V&M designs, manufactures and distributes instrumentation for the oil and gas and process control industries to be used for the measurement and control of pressures, temperatures, levels and flows. The four main product lines of this group are NUFLO™, BARTON®, CALDON® and CLIF MOCK™.
The V&M segment also provides aftermarket services including OEM parts, repair, field service, asset management and remanufactured product to customers, particularly in support of the installed base of equipment sold under the numerous brands within the expanded V&M businesses. In 2007, V&M acquired Paradigm Services, LP, adding two new field service centers to the Company’s valve aftermarket business.
V&M 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.
V&M’s primary customers include oil and gas majors, independent producers, engineering and construction companies, pipeline operators, drilling contractors and major chemical, petrochemical and refining companies.
Compression Systems Segment
CS is a provider of reciprocating and integrally geared centrifugal compression equipment and aftermarket parts and services. Reciprocating compression equipment (Reciprocating Technology) is used throughout the energy industry by gas transmission companies, compression leasing companies, oil and gas producers and independent power producers. Integrally geared centrifugal compressors (Centrifugal Technology) are used by customers around the world in a variety of industries, including air separation, petrochemical and chemical. CS’s products include aftermarket parts and services, integral engine-compressors, separable compressors, turbochargers, integrally geared centrifugal compressors, compressor systems and controls. Its aftermarket services include spare parts, technical services, repairs, overhauls and upgrades.
The CS Reciprocating Technology group provides reciprocating compression equipment and related aftermarket parts and services for the oil and gas industry. Its products and services are marketed under the AJAX®, SUPERIOR®, COOPER-BESSEMER®, PENN™, ENTERPRISE™, TEXCENTRIC®, COMPRESSION SPECIALTIES™, and TURBINE SPECIALTIES™ brand names. CS provides global support for its products and maintains sales and/or service offices in key international locations. Ajax integral engine-compressors, which combine the engine and compressor on a single drive shaft, are used for gas re-injection and storage, as well as on smaller gathering and transmission lines. Superior-brand separable compressors are used primarily for natural gas applications, including production, storage, withdrawal, processing and transmission, as well as petrochemical processing. These high-speed separable compressor units can be matched with either natural gas engine drivers or electric motors.
Two new product offerings in the reciprocating product line are reflected in the 2006 results. The Axis™ reciprocating compressor is an all-new barrel-frame design targeted at the natural gas lease fleet markets. The new C-Force™ compressor was created through the addition of new tandem cylinders to a small Superior reciprocating frame, providing an offering suited to compressed natural gas (CNG) applications.
For the year ended December 31, 2006,2007, approximately 69%66% of the Reciprocating Technology revenues are generated by aftermarket parts and services in support of the Company’s worldwide installed base of compression equipment.
Customers for Reciprocating Technology products include gas transmission companies, compression leasing companies, oil and gas producers and processors and independent power producers.
The CS Centrifugal Technology group manufactures and supplies integrally geared centrifugal compressors and provides aftermarket services to customers worldwide. Centrifugal air compressors, used primarily in manufacturing processes (plant air), are sold under the trade name of Turbo-Air®, with specific models including the TA-2000, TAC-2000, TA-3000, TA-6000 and TA-9000.
Engineered compressors are used in the process air and gas industries and are identified by the MSG® trade name. The process and plant air centrifugal compressors deliver oil-free compressed air and other gases to customers, thus preventing oil contamination of the finished products.
New product offerings planned for 2007 include the MSG80 and the TA-2040. The MSG80 will be the largest compressor made by Cameron and will target the air separation market, especially steel manufacturers. The TA-2040 will be a high pressure compressor to be sold into the plastic bottle blowing market.
Compression SystemsCS provides installation and maintenance service, parts, repairs, overhauls and upgrades to its worldwide customers for plant air and process gas compressors. It also provides aftermarket service and repairs on all equipment it produces through a worldwide network of distributors, service centers and field service technicians utilizing an extensive inventory of parts.
Centrifugal Technology customers include petrochemical and refining companies, natural gas processing companies, durable goods manufacturers, utilities, air separation and chemical companies.
Cameron is one of the leaders in the global market for the supply of petroleum production equipment. Cameron believes that it is well-positioned to serve these markets. Plant and service center facilities around the world in major oil- and gas-producing regions provide a broad market coverage. Information relating to revenues generated from shipments to various geographic regions of the world is set forth on page 25 of “Management’s Discussion and Analysis of Operations and Financial Condition of Cameron International Corporation” incorporated by reference in Part II, Item 7 of this Annual Report on Form 10-K and incorporated herein by reference.
The global international market continues to be a source of growth for Cameron. This was particularly evident with regardas revenues generated from shipments to a surge in demand for additional drilling rigscustomers outside of North America climbed from 55% of the Company’s revenues in 2006 by oil companies worldwide.to 63% of the Company’s revenues in 2007. The desire to expand oil and gas resources and transmission capacity in developed and developing countries, for both economic and political reasons, continues to be a major factor 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, the Far and Middle East and West Africa provide the Company with the ability to serve the global marketplace.
In each of Cameron’s business segments, a large population of installed engines, compression equipment and oil and gas production equipment exists in the worldwide market. The long-lived nature of the equipment provides a relatively stable repair parts and service business. However, with respect to Compression Systems, approximately 37%31% of that segment’s 20062007 revenues came from the sale of replacement parts for equipment that the Company no longer manufactures. Many of these units have been in service for long periods of time and are gradually being replaced. As this installed base of legacy equipment declines, the Company’s potential market for parts orders ismay also be reduced. In recent years, the Company’s revenues from replacement parts associated with legacy equipment have declined nominally.
In recent years, DPS has been expanding into the deepwater subsea systems market. This market is significantly different from the Company’s other markets since deepwater subsea systems projects are significantly larger in scope and complexity, in terms of both technical and logistical requirements. Subsea projects (i) typically involve long lead times, (ii) typically are larger in financial scope, (iii) typically require substantial engineering resources to meet the technical requirements of the project and (iv) often involve the application of existing technology to new environments and in some cases, the application of new technology. These projects accounted for approximately 8%8.5% of the Company’s consolidated revenues for the year ended December 31, 2006.2007. To the extent the Company experiences difficulties in meeting the technical and/or delivery requirements of the projects, the Company’s earnings or liquidity could be negatively impacted. As of December 31, 2006,2007, the Company had a subsea systems project backlog of approximately $408.7$954.7 million.
Also, see Part I, Item 1A for a discussion of other risk factors, some of which are market related, that could affect the Company’s financial condition and future results.
Cameron introduced several drilling products during the last several years. These products include the 3.5 million-pound load capacity LoadKing™ riser system, used for drilling in up to 10,000-foot water depths; a lightweight and lower-cost locking
mechanism for subsea BOPs; a new generation of variable-bore ram packers; a Freestanding Drilling Riser, and an Environmental Safe Guard system.
Other Cameron-developed products include the patented SpoolTree™ subsea production system; the CAMTROLCAMTROL™ system that includes all of Cameron’s controls capabilities of production, drilling and workover; the EVO™ blowout preventer, introduced in 2007, which is a compact, lighter version of Cameron’s traditional subsea BOP and is offered with a unique patent-pending locking system; and the CameronDC subsea production system, which is the world’s first all-electric direct current-powered subsea production system, designed for increased reliability and improved performance in deepwater applications. Initial deployment of the CameronDC subsea production system is planned for mid-2007scheduled to occur in the Dutch North Sea.2008.
During 2005, Cameron introduced a new subsea controls system that combines the traditional subsea control module and the subsea accumulator module in a single package, allowing for more efficient operation of the subsea tree and manifold valves. Additionally, a new state-of-the-art subsea test chamber in Cameron’s controls engineering facility in Celle, Germany facilitates testing of the Company’s control system.
Also in 2005, Cameron launched its updated CAMTROL subsea control module, which includes new electronics, lower power demand, a DC power option and fiber optic communications to further increase reliability and enable extended offset developments and high-bandwidth intelligent completions.
Cameron has also formed a joint venture with Curtiss-Wright EMD, with plans to combine Curtiss-Wright’s motor and pump expertise with Cameron’s subsea technologies to develop integrated subsea multiphase pumping systems. As a result of this joint venture, as well as the separation technology available through Petreco, the Company was able to introduce in 2007 CAMFORCE™, a collection of subsea processing products and services designed to enhance production from deepwater fields.
In 2006, Subsea Systems and Petreco introduceddesigned their two-phase and three-phase subsea separation systems developed through a joint technology team originally formed in 2005.
During 2005, DPS’s Flow Control group introduced a new three-inch underbalanced drilling choke, the DR30, in response to drilling customers’ increasing demand for higher-capacity chokes for use in underbalanced drilling applications. During 2007, Flow Control also introduced a new subsea chemical injection metering valve as well as a multi-stage control choke with the SILENCER™ trim which is designed to address noise and velocity control issues in high pressure drop and surge control applications.
Compression Systems’The CS product range was expanded through the addition of compressor frames (TAC-2000, TA-2020, TA-3000, TA-6000 and TA-9000) and the addition of trademarked accessories such as Dry PakPak™ heat of compression dryers and Turboblend,Turboblend™, a hydro-cracked turbomachinery lubricating oil. Compression Systems’The Engineered Compressor product line was redefined and the MSG Renaissance program was introduced to update the MSG product line.
Compression SystemsCS has focused product development resources to further expand its high-efficiency plant air compressor line and to provide engineered compressors matched to the requirements of its customers. The latter is being achieved by advances in aerodynamic and rotor dynamic analytical design capability and the addition of centrifugal gas applications.
Two new offerings were introduced in 2005 in the reciprocating product line. The AXIS™ reciprocating compressor is an all-new barrel-frame design targeted at the natural gas lease fleet markets. The new C-Force™ compressor was created through the addition of new tandem cylinders to a small Superior reciprocating frame, providing an offering ideally suited to compressed natural gas applications. During 2007, the Company also reentered the separable engine market by reintroducing two models of Superior-brand legacy engines, designed to be packaged with Cameron’s Superior separable compressors.
Compression Systems plansDuring 2008, diversification efforts in the centrifugal product line will extend to add two additional products to its centrifugal line in 2007 - the MSG80plastic bottle manufacturing market with the introduction of the Turbo-Air® 2040 compressor that has been designed and TA-2040, both discussed previously.tested for this application.
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 Cameron.
Cameron has a leading position in the petroleum production equipment markets. In these markets, Cameron competes principally with Aker Kvaerner, Baker Hughes Centralift division of Baker Hughes, Inc., Balon Corporation, Circor International, Inc., Daniel Flow Measurement Division ofDover Corporation, Dril-Quip, Inc., Emerson Process Management, Dril-Quip, Inc., FlowServ Corp., FMC Technologies, Inc., GE Oil & Gas Group Hanover Compressor Company,(including Vetco Gray), Hydril Company (in January 2008, it was announced that General Electric had reached an agreement to purchase the Hydril pressure control business from Tenaris), Masterflo (a division of Steam-FloStream-Flo Industries Ltd. (i.e. Stream)), NATCO Group, Inc., National Oilwell Varco Inc., PBV-USA, Inc. (a Zy-Tech Global Industries company), Petrovalve (a Flotek Industries, Inc. company), Pibiviese, SPX Corporation’s Flow Technology Segment, T3 Energy Services Inc., Tyco International Ltd., Valve Automation divisionthe Weatherford Artificial Lift business of Emerson Process Management, Vetco International, Ltd. (in January 2007, it wasWeatherford, Inc. and Wood Group.
announced that General Electric had reached an agreement to purchase Vetco Gray, the oil and gas business unit of Vetco International, Ltd.), Wood Group and Worldwide Oilfield Machinery, Inc.
The principal competitive factors in the petroleum production equipment markets are technology, quality, service and price. Cameron believes several factors give it a strong competitive position in these markets. Most significant are 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.
Cameron also has a strong position in the compression equipment markets. In these markets, Cameron competes principally with the Ariel Corporation, Atlas-Copco AB, CECO (a Compressor Engineering Corporation company), Demag, Dresser-Rand Company, FS-Elliott Company, LLC, Endyn Energy Dynamics, Hoerbiger Group and IR Air Solutions, TCS and Universal Compression.Solutions. The principal competitive factors in the compression equipment markets are engineering and design capabilities, product performance, reliability, quality, service and price. Cameron has a competent engineering staff and skilled technical and service representatives.
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 recentprevious years, Cameron has rationalized plants and products, closed various manufacturing facilities, moved product lines to achieve economies of scale, and upgraded other facilities. In more recent times, the Company has constructed or begun construction on new facilities mainly in certain international locations in order to meet current and expected future demand, particularly with regard to its surface and subsea product offerings. This is an ongoing process as the Company seeks ways to improve delivery performance and reduce costs. Cameron maintains advanced manufacturing, quality assurance and testing equipment geared to the specific products that it manufactures and uses process automation in its manufacturing operations. Manufacturing facilities typically 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.
Cameron’s test capabilities are critical to its overall processes. The Company has the capability to test most equipment at rated operating conditions, 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 Cameron’s Asian, European and Latin American manufacturing plants are ISO certified and API licensed, and most of the U.S. plants are ISO certified. ISO is an internationally recognized verification system for quality management.
Cameron’s backlog was approximately $3.531$4.3 billion at December 31, 20062007 (approximately 78%80% of which is expected to be shipped during 2007)2008), as compared to $2.156$3.5 billion at December 31, 2005,2006, and $1.0$2.2 billion at December 31, 2004.2005. Backlog consists of customer orders for which a purchase order has been received, satisfactory credit or financing arrangements exist and delivery is scheduled.
As part of its ongoing research, development and manufacturing activities, Cameron has a policy of seeking patents when appropriate on inventions involving new products and product improvements. Cameron owns 305307 unexpired United States patents and 613630 unexpired foreign patents. During 2006, 272007, 43 new U.S. and 6642 new foreign patent applications were filed.
Although in the aggregate these patents are of considerable importance to the manufacturing of many of its products, Cameron does not consider any single patent or group of patents to be material to its business as a whole.
Trademarks are also of considerable importance to the marketing of Cameron’s products. Cameron considers the following trade names to be material to its business as a whole: CAMERON, COOPER-BESSEMER, AJAX, WILLIS and W-K-M. Other important trademarks used by Cameron include AOP, AXIS, BARTON, BFCC, C-B TURBOCHARGER, CALDON, CAMCHEC, CAMERONDC, CAMFORCE, CLIF MOCK, CONTROL SEAL, CSI, DEMCO, DEPURATOR, DRYPAK, DYNACENTRIC, DYNASEAL, EDGE, ENTECH, ENTERPRISE, EVO, FOSTER, GENERAL VALVE, GENUINE JOY, GROVE, H & H, IC, INTERNATIONAL VALVES LTD. (U.K.), KCC, KREBS, LEDEEN, MARS, MCEVOY, METROL, MSG, NAVCO, NORTH STAR, NUFLO, TECHNOLOGIES, INC., NICKLES
INDUSTRIAL, NUTRON, ORBIT, PENN, PETRECO, POW-R-SEAL, QUAD 2000, RETSCO, RING-O, SAF-T-SEAL, SPOOLTREE, STEROM, SUPERIOR, TA, TBV, TECHNO, TEXCENTRIC, TEXSTEAM, THORNHILL CRAVER, TRUSEAL, TUNDRA, TURBINE SPECIALTIES (RECIPROCATING PRODUCTS), TK VALVE, TEXSTEAM, TOM WHEATLEY, TSI, TUNDRA, TURBO AIR, TWINSEAL, TXT, UNICEL, VALOR, VANTAGE, VORTOIL, WEMCO, WHEATLEY and others. Cameron has registered trademarks in countries where such registration is deemed important.
During 2006, the Company acquired the assets and liabilities
Cameron has the right to use the trademark Joy on aftermarket parts until November 2027.
Cameron also relies on trade secret protection for its confidential and proprietary information. Cameron routinely enters into confidentiality agreements with its employees, partners and suppliers. There can be no assurance, however, that others will not independently obtain similar information or otherwise gain access to Cameron’s trade secrets.
As of December 31, 2006,2007, Cameron had approximately 12,40015,400 employees, of which approximately 3,0003,600 were represented by labor unions. Over 1,2501,400 of these employees are covered by contracts expiring in 2007.2008. Approximately 634500 employees at the Company’s plants in Italy are under contracts which expire in mid-2007.mid-2008. In Brazil and Romania, the Company has approximately 492125 and 550 employees, respectively, at its facilities with contracts expiring on various dates in the second half of 2007.2008.
During 2006, new three-year agreements were reached with the International Association of Machinists and Aerospace Workers covering approximately 247 employees at the Company’s Centrifugal Technology facility in Buffalo, New York and approximately 59 employees at a DPS facility in Brookshire, Texas. In addition, a new three and one-half year agreement was entered into in January 2006 covering approximately 349 employees at the Company’s Leeds, England facility. The Company also entered into athree new one-year agreementagreements during 2006,2007, which will expire in the third quartersecond half of 2007, covering2008, two of which covered approximately 12550 employees at a newly acquiredour Nigeria facility in Brazil.and one of which covered approximately 80 employees at our City of Industry, California facility.
Executive Officers of the Registrant
Name and Age | Present Principal Position and Other Material Positions Held During Last Five Years |
Sheldon R. Erikson (65)(66) | Chief Executive Officer since January 1995. President from January 1995 to December 2006. Chairman of the Board of Directors since May 1996. Chairman of the Board from 1988 to April 1995 and President and Chief Executive Officer from 1987 to April 1995 of The Western Company of North America. |
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Jack B. Moore (53)(54) | President and Chief Operating Officer since January 2007. Senior Vice President since July 2005. Vice President from May 2003 to July 2005. President, Drilling and Production Systems from July 2002 to December 2006. Vice President and General Manager, Cameron Western Hemisphere from July 1999 to July 2002. Vice President Western Hemisphere Operations, Vice President Eastern Hemisphere, Vice President Latin American Operations, Director Human Resources, Director Market Research and Director Materials of Baker Hughes Incorporated from 1976 to July 1999. |
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Franklin Myers (54)(55) | Senior Vice President of Finance and Chief Financial Officer since January 2003. Senior Vice President from July 2001 to January 2003, Senior Vice President and President of the Cooper Energy Services division from August 1998 to July 2001 and Senior Vice President, General Counsel and Secretary from April 1995 to July 1999. |
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John D. Carne (58)(59) | Senior Vice President since February 2006. Vice President from May 2003 to February 2006. President, Drilling and Production Systems since January 2007. President, Valves and Measurement from April 2002 to December 2006. Director of Operations, Eastern Hemisphere, Cameron Division from 1999 to March 2002. Plant Manager, Leeds, England, Cameron Division from 1996 to 1999. Director of Operations, U.K. & Norway, Cooper Energy Services (U.K.) Ltd. from 1988 to 1996. |
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William C. Lemmer (62)(63) | Senior Vice President, General Counsel and Secretary since July 1999.2007. Vice President, General Counsel and Secretary from July 1999 to July 2007. Vice President, General Counsel and Secretary of Oryx Energy Company from 1994 to March 1999. |
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JoeJoseph H. Mongrain (48)(50) | Vice President, Human Resources since June 2006. Director Human Resources, Schlumberger, Data and Consulting from May 2004 to May 2006 and Director, Human Resources, Schlumberger, North and South America from January 2001 to April 2004..2004. |
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Lorne E. Phillips (35)(36) | Vice President and Treasurer since December 2006. Treasurer from July 2005 to December 2006. General Manager, Canadian Operations from March 2003 to July 2005, Vice President, Marketing and M & A for Cameron’s Valves & Measurement group from June 2002 to March 2003 and Manager, Business Development from July 1999 to June 2002. |
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Robert J. Rajeski (61)(62) | Vice President since July 2000. President, Compression Systems since October 2002. President, Cooper Turbocompressor division from July 1999 to October 2002 and President, Cooper Energy Services division from July 2001 to October 2002. Vice President and General Manager of Ingersoll-Dresser Pump Co., Engineered Pump division from 1994 to July 1999. |
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Charles M. Sledge (41)(42) | Vice President and Corporate Controller since July 2001. Senior Vice President, Finance and Treasurer from 1999 to June 2001, and Vice President, Controller from 1996 to 1999, of Stage Stores, Inc., a chain of family apparel stores. |
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Dalton L. Thomas (57) | Vice President, Operations Support, since February 2004. President, Cameron division from July 1998 to 2001. Vice President, Eastern Hemisphere for Cameron division from 1995 to July 1998. |
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James E. Wright (52)(54) | Vice President and President, Valves and Measurement group since January 2007. President, Distributed and Process Valves divisions from December 2005 to December 2006. Vice President and General Manager, Distributed Products from August 2002 to December 2005. Vice President and General Manager, North America Pipeline and Distributor Products from June 2001 to August 2002 and Vice President Marketing and North American Sales for V&M from August 1998 to June 2001. |
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Glossary of Terms
Actuator. A hydraulic or electric motor used to open or close valves.
Blowout Preventer.A hydraulically operated system of safety valves installed at the wellhead during drilling and completion operations for the purpose of preventing an increase of high-pressure formation fluids — oil, gas or water — in the wellbore from turning into a “blowout” of the well.
Centrifugal compressor. A compressor with an impeller or rotor, a rotor shaft and a casing which discharges gases under pressure by centrifugal force.
Choke.A type of valve used to control the rate and pressure of the flow of production from a well or through flowlines.
Christmas tree. An assembly of valves, pipes and fittings used to control the flow of oil and gas from a well.
Compressor.A device used to create a pressure differential in order to move or compress a vapor or a gas.
Controls. A device which allows the remote triggering of an actuator to open or close a valve.
Elastomer. A rubberized pressure control sealing element used in drilling and wellhead applications.
Integral reciprocating engine-compressor.A compressor in which the crankshaft is shared by the engine and compressor, each having its own piston rods driven by the shared crankshaft.
Integrally geared centrifugal compressor.A compressor in which the motor is geared so that the compressor runs at higher rpms than the motor itself to gain efficiency.
Reciprocating compressor.A compressor in which the compression effect is produced by the reciprocating motion of pistons and plungers operating in cylinders.
Riser.Pipe used to connect the wellbore of offshore wells to drilling or production equipment on the surface, and through which drilling fluids or hydrocarbons travel.
Valve.A device used to control the rate of flow in a line, to open or shut off a line completely, or to serve as an automatic or semi-automatic safety device.
Wellhead.The equipment installed at the surface of a wellbore to maintain control of a well and including equipment such as the casing head, tubing head and Christmas tree.
The information set forth under the caption “Factors That May Affect Financial Condition and Future Results” on pages 3537 to 3739 in the 20062007 Annual Report to Stockholders is incorporated herein by reference.
There were no unresolved comments from the SEC staff at the time of filing of this Form 10-K.
The Company currently operates facilities ranging in size from approximately 670 square feet to approximately 1,350,000 square feet. TheIn addition to its manufacturing facilities, the Company also owns and leases warehouses, distribution centers, aftermarket and storage facilities, sales and administrative offices. The Company leases its corporate headquarters office space and space for the DPS, V&M and CS division headquarters in Houston, Texas.
The Company manufactures, markets and sells its products and provides services throughout the world, operating facilities in numerous countries. At December 31, 2006,2007, the significant facilities used by Cameron throughout the world for manufacturing,
distribution, aftermarket services, machining, storage, warehousing, sales and administration contained an aggregate of approximately 11,018,00011,505,000 square feet of space, of which approximately 7,011,0006,844,000 square feet (64%(59%) was owned and 4,007,000 (36%4,661,000 (41%) was leased. Of this total, approximately 6,455,0006,189,000 square feet of space (59%(54%) is located in the Western Hemisphere, 3,404,0003,935,000 square feet of space (31%(34%) is located in the Eastern Hemisphere, 936,0001,023,000 square feet of space (8%(9%) is located in Asia Pacific and the Middle East and 223,000358,000 square feet of space (2%(3%) is located in West Africa. The table below shows the number of significant operating manufacturing, warehouse, distribution and aftermarket facilities and sales and administrative offices by business segment and geographic area. DPS and V&M share space in certain facilities and, thus, are being reported together.
| | Western Hemisphere | | | Eastern Hemisphere | | | Asia/Pacific and Middle East | | | West Africa | | | Total | |
DPS and V&M | | | 127 | | | | 34 | | | | 43 | | | | 12 | | | | 216 | |
CS | | | 16 | | | | 3 | | | | 2 | | | | — | | | | 21 | |
Corporate | | | 1 | | | | 2 | | | | — | | | | — | | | | 3 | |
| | | 144 | | | | 39 | | | | 45 | | | | 12 | | | | 240 | |
| Western Hemisphere | Eastern Hemisphere | Asia/Pacific and Middle East | West Africa | Total |
DPS and V&M | 133 | 28 | 41 | 13 | 215 |
CS | 19 | 3 | 2 | — | 24 |
Taking into consideration the construction that is currently underway offor a new subseasurface products manufacturing facility in Johor, MalaysiaRomania that is scheduled to bebegin operations in full operation by the fourth quarter of 2007,2008, 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.
The Company is subject to a number of contingencies, which includeincluding environmental matters, litigation and tax contingencies.
Environmental Matters
The Company’s worldwide operations are subject to domestic and international regulations with regard to air, soil and water quality as well as other environmental matters. The Company, through its environmental management system and active third-party audit program, believes it is in substantial compliance with these regulations.
The Company is currently identified as a potentially responsible party (PRP) with respect to two sites designated for cleanup under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) or similar state laws. One of these sites is Osborne, Pennsylvania (a landfill into which a predecessor of the CS operation in Grove City, Pennsylvania deposited waste), where remediation is complete and remaining costs relate to ongoing ground water treatment and monitoring. The other is believed to be a de minimis exposure. The Company is also engaged in site cleanup under the Voluntary Cleanup Plan of the Texas Commission on Environmental Quality at former manufacturing locations in Houston and Missouri City, Texas. Additionally, the Company has discontinueddiscontinuted operations at a number of other sites which had been active for many years. The Company does not believe, based upon information currently available, that there are any material environmental liabilities existing at these locations. At December 31, 2006,2007, the Company’s consolidated balance sheet included a noncurrent liability of $7.0approximately $7.5 million for environmental matters.
Legal Matters
At the former manufacturing site in Houston, Texas,In 2001, the Company discovered that contaminated underground water from thisthe former manufacturing site in Houston referenced above had migrated under an adjacent residential area. Pursuant to applicable state regulations, the Company notified the affected homeowners in 2001. Since that time,homeowners. Concerns over the impact on property values of the underground water contamination and its public disclosure led to a number of claims by homeowners.
The Company has entered into a number of individual settlements and has settled a class action lawsuit. Twenty-one of the individual settlements were made in the form of agreements with 21 homeowners that obligated the Company to reimburse them for any estimated decline in the value of their homes at time of sale due to potential buyer’sbuyers’ concerns over contamination following a sale or, in the case of some agreements, to purchase the property after an agreed marketing period. FourThree of these agreements have had no claims made under them yet. In addition, theThe Company has also settled eightten other property claims by homeowners who have sold their properties. The Company has had expenses and losses of approximately $8.3 million from 2002 through 2006 related to these various agreements and settlements.
In addition, the Company is a named defendant in three lawsuits regarding this contamination and another suit which washas settled in January, 2007. The settled case is Valice v. Cameron Iron Works, Inc. (80th(80th Jud. Dist. Ct., Harris County, filed June 21, 2002), which was filed and settled as a class action. Pursuant to the settlement, the homeowners who remained part of the class will beare entitled to receive a cash payment of approximately 3% of the 2006 appraised value of their property or reimbursement of any diminution in value of their property due to contamination concerns at the time of any sale. ThereTo date, 60 homeowners have elected the cash payment.
Of the 258 properties included in the Valice class, there were 21 homeowners who opted out of the class settlement.
The other There are three suits currently pending regarding this matter have been filed by a number of homeowners who have opted out of the class action settlement.non-settling homeowners. Moldovan v. Cameron Iron Works, Inc. (165th(165th Jud. Dist. Ct., Harris County, filed October 23, 2006), was filed by six homeowners who opted-out of the class settlement. Othersuch homeowners. The other suits were filed includeby individual homeowners, Tuma v. Cameron Iron Works, Inc. (334thth Judicial District Court of Harris County, Texas, filed on November 27, 2006), and Rudelson v. Cooper Industries, Inc. (189thth Judicial District Court of Harris County, Texas, filed on November 29, 2006). The complaints filed in these actions make the claim that the contaminated underground water has reduced property values and seeksseek recovery of alleged actual and exemplary damages for the loss of property value.
TheWhile one suit related to this matter involving health risks has been filed, the Company is of the opinion that there is no health risk to area residents and that the lawsuits essentially reflect concerns over a possible decline in property value. suit is without merit.
The Company believes, based on its review of the facts and law, that any potential exposure from existing agreements, the class action settlement or other actions that have been or may be filed, will not have a material adverse effect on its financial position or results of operations. The Company reservedCompany’s consolidated balance sheet included a totalliability of $17.5$13.5 million reserved for these matters as of December 31, 2006.2007.
The Company had been named as a defendant in a suit brought by a purchaser of an option to purchase a parcel of the same former manufacturing site, Silber/I-10 Venture Ltd., f/k/a Rocksprings Ltd. v. Falcon Interests Realty Corp., Cooper Industries Inc. and Cooper Cameron Corporation (212th Judicial District Court, Galveston County, filed August 15, 2002) that alleged fraud and breach of contract regarding the environmental condition of the parcel under option. The parties have settled this matter and the case has been dismissed. Based on the Asset Transfer Agreement pursuant to which Cooper Industries, Inc. (Cooper) spun-off the Company, Cooper has made a claim of approximately $2,500,000 against the Company for reimbursement of its legal fees and settlement costs with respect to this matter. The Company is of the opinion it is not required to make this reimbursement and intends to vigorously defend itself.
The Company has been named as a defendant in a number of multi-defendant, multi-plaintiff tort lawsuits since 1995. At December 31, 2006,2007, the Company’s consolidated balance sheet included a liability of approximately $4.3$2.9 million for such cases, including estimated legal costs.
The Company believes, based on its review of the facts and law, that the potential exposure from the remainingthese suits will not have a material adverse effect on its consolidated results of operations, financial condition or liquidity.
Regulatory Contingencies
In January 2007, the Company underwent a Pre-Assessment Survey as part of a Focused Assessment initiated by the Regulatory Audit Division of the U.S. Customs and Border Protection, Department of Homeland Security. The Pre-Assessment Survey resulted in a finding that the Company had deficiencies in its U.S. Customs compliance processes. The Company is taking corrective action and will undergo Assessment Compliance Testing in the first half of 2008. At December 31, 2007, the Company's consolidated balance sheet included a liability of $0.8 million for the estimated additional customs duties which may be due.
In July 2007, the Company was one of a number of companies to receive a letter from the Criminal Division of the U.S. Department of Justice (DOJ) requesting information on their use of a freight forwarder and customs clearance broker. The DOJ is inquiring into whether certain of the services provided to the Company by the freight forwarder may have involved violations of the U.S. Foreign Corrupt Practices Act (FCPA). The Company is conducting an internal investigation in response, as discussed below, and is providing the requested information to the DOJ.
The Company engaged special counsel reporting to the Audit Committee of the Board of Directors to conduct an investigation into its dealings with the freight forwarder to determine if any payment made to or by the freight forwarder and customs clearing broker on the Company's behalf constituted a violation of the FCPA. The investigation is also looking into activities of Company employees and agents with respect to immigration matters and importation permitting. To date, the special counsel has found that the Company utilized certain services in Nigeria offered by the customs broker that appear to be similar to services that have been under review by the DOJ. Special counsel is reviewing these and other services and activities to determine whether they were conducted in compliance with all applicable laws and regulations. Special counsel is also reviewing the extent, if any, of the Company’s knowledge, and its involvement in the performance, of these services and activities and whether the Company fulfilled its obligations under the FCPA.
In addition, the U.S. Securities and Exchange Commission (SEC) is conducting an informal inquiry into the same matters currently under review by the DOJ. As part of this inquiry the SEC has requested that the Company provide to them the information and documents that have been requested by and are being provided to the DOJ. The Company is cooperating fully with the SEC, as it is doing with the DOJ, and is providing the requested materials. At this stage of the internal investigation, the Company cannot predict the ultimate outcome of either the internal investigation or the government inquiries. The Company has also undertaken an enhanced compliance training effort for its personnel, including foreign operations personnel dealing with customs clearance regulations.
Tax Contingencies
The Company has legal entities in over 35 countries. As a result, the Company is subject to various tax filing requirements in these countries. The Company prepares its tax filings in a manner which it believes is consistent with such filing requirements. However, some of the tax laws and regulations which the Company is subject to are subject to interpretation and/or judgment. Although the Company believes that the tax liabilityliabilities for periods ending on or before the balance sheet date have been adequately provided for in the financial statements, to the extent that a taxing authority believes that the Company has not prepared its tax filings in accordance with the authority’s interpretation of the tax laws/regulations, the Company could be exposed to additional taxes.
ThereA Special Meeting of Stockholders of the Company was held in Houston, Texas on December 7, 2007 for the purpose of approving an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 150,000,000 to 400,000,000. Proxies for the meeting were solicited pursuant to Regulation 14 of the Securities Exchange Act of 1934 and there was no matters submittedsolicitation in opposition to a votemanagement’s solicitation. Results of security holders during the fourth quarter of 2006.stockholder voting were as follows:
| | For | | | Against | | | Abstaining /Withheld |
| | | | | | | | |
Increase the number of authorized shares of common stock to 400,000,000 | | 87,080,658 | | | 10,987,871 | | | 124,077 |
The common stock of Cameron International Corporation, par value $.01 per share (together with the associated Rights to Purchase Series AB Junior Participating Preferred Stock), is traded on the New York Stock Exchange (“NYSE”) under the symbol CAM. No dividends were paid during 20062007 or 2005.2006.
| | Price Range ($) |
| | High | | | Low | | | Last |
2007 | | | | | | | | |
First Quarter | | $ | 32.01 | | | $ | 24.30 | | | $ | 31.40 |
Second Quarter | | | 37.21 | | | | 31.29 | | | | 35.74 |
Third Quarter | | | 47.95 | | | | 35.03 | | | | 46.15 |
Fourth Quarter | | | 53.83 | | | | 42.76 | | | | 48.13 | |
The trading activity during 2006 and 2005 was as follows (reflects a 2-for-1 stock split effective December 15, 2005):
| Price Range ($) |
| High | Low | Last |
2006 | | | |
First Quarter | $50.61 | $38.08 | $44.08 |
Second Quarter | 56.09 | 42.10 | 47.77 |
Third Quarter | 52.07 | 42.78 | 48.31 |
Fourth Quarter | 57.81 | 44.60 | 53.05 |
| Price Range ($) | | Price Range ($) | |
| High | Low | Last | | High | | | Low | | | Last |
2005 | | | | |
2006 | | | | | | | | | | |
First Quarter | $29.805 | $25.52 | $28.605 | | $ | 25.30 | | | $ | 19.04 | | | $ | 22.04 |
Second Quarter | 31.99 | 26.76 | 31.025 | | 28.04 | | | 21.05 | | | 23.89 |
Third Quarter | 37.695 | 30.86 | 36.965 | | 26.03 | | | 21.39 | | | 24.16 |
Fourth Quarter | 43.10 | 32.21 | 41.40 | | 28.90 | | | 22.30 | | | 26.52 | |