Cameron International 10-Q 3 May 10 2010 Q1 Quarterly report Financial data

CONSOLIDATED CONDENSED RESULTS

CONSOLIDATED CONDENSED RESULTS OF OPERATIONS (USD $)
In Millions, except Per Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Net Income
REVENUES	1346.7	$1,257
COSTS AND EXPENSES
Cost of sales (exclusive of depreciation and amortization shown separately below)	914.1	843.7
Selling and administrative expenses	196.7	164.6
Depreciation and amortization	48.1	36.7
Interest income	-0.9	-2.2
Interest expense	17.9	24.6
Restructuring expense and acquisition related costs	10.3	22.3
Total costs and expenses	1186.2	1089.7
Income before income taxes	160.5	167.3
Income tax provision	-40.1	-52.7
Net income	120.4	114.6
Earnings per common share:
Basic	0.49	0.53
Diluted	0.48	0.52
Shares used in computing earnings per common share:
Basic	244.4	216.9
Diluted	249	220

CONSOLIDATED CONDENSED BALANCE

CONSOLIDATED CONDENSED BALANCE SHEETS (USD $)
In Millions	Mar. 31, 2010	Dec. 31, 2009
ASSETS
Cash and cash equivalents	$1,619	$1,861
Receivables, net	903.7	959
Inventories, net	1736.1	1664.2
Other	263.3	230
Total current assets	4522.1	4714.2
Plant and equipment, net	1190.8	1192.4
Goodwill	1452.4	1441.6
Other assets	367.4	377.2
Total assets	7532.7	7725.4
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt	6.2	22.2
Accounts payable and accrued liabilities	1961.6	2208.2
Accrued income taxes	45.6	65.9
Total current liabilities	2013.4	2296.3
Long-term debt	1,257	1232.3
Deferred income taxes	135	123
Other long-term liabilities	175.6	154.1
Total liabilities	3,581	3805.7
Stockholders' Equity
Common stock, par value $.01 per share, 400,000,000 shares authorized, 263,111,472 shares issued at March 31, 2010 and December 31, 2009	2.6	2.6
Capital in excess of par value	2239.4	2,244
Retained earnings	2405.8	2285.4
Accumulated other elements of comprehensive income (loss)	-47.5	9.5
Less: Treasury stock, 19,208,466 shares at March 31, 2010 (18,453,758 shares at December 31, 2009)	-648.6	-621.8
Total stockholders' equity	3951.7	3919.7
Total liabilities and stockholders' equity	7532.7	7725.4

PARENTHETICAL DATA TO THE CONDE

PARENTHETICAL DATA TO THE CONDENSED CONSOLIDATED BALANCE SHEETS
	Mar. 31, 2010	Dec. 31, 2009
Stockholders' Equity
Common stock, par value (in dollars)	0.01	0.01
Common stock, shares Authorized (in shares)	400,000,000	400,000,000
Common stock, Shares issued (in shares)	263,111,472	263,111,472
Less: Treasury stock, shares (in shares)	19,208,466	18,453,758

CONSOLIDATED CONDENSED STATEMEN

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (USD $)
In Millions	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Cash flows from operating activities:
Net income	120.4	114.6
Adjustments to reconcile net income to net cash used for operating activities:
Depreciation	33.8	26.5
Amortization	14.3	10.2
Non-cash stock compensation expense	12	7.7
Tax benefit of employee stock compensation plan transactions and deferred income taxes	-5.4	2.8
Changes in assets and liabilities, net of translation, acquisitions and non-cash items:
Receivables	59.9	-2.4
Inventories	(44)	-187.8
Accounts payable and accrued liabilities	-227.8	-61.1
Other assets and liabilities, net	(79)	-38.8
Net cash used for operating activities	-115.8	-128.3
Cash flows from investing activities:
Capital expenditures	-29.8	-48.9
Acquisitions, net of cash acquired	-27.9	0
Proceeds from sale of plant and equipment	2.9	1.5
Net cash used for investing activities	-54.8	-47.4
Cash flows from financing activities:
Short-term loan borrowings (repayments), net	-16.5	23
Purchase of treasury stock	-39.8	-7.1
Proceeds from stock option exercises, net of tax payments from stock compensation plan transactions	-6.5	-1.1
Excess tax benefits from employee stock compensation plans transactions	3.8	1.8
Principal payments on capital leases	-1.6	(2)
Net cash (used for) provided by financing activities	-60.6	14.6
Effect of translation on cash	-10.8	-17.9
Decrease in cash and cash equivalents	(242)	(179)
Cash and cash equivalents, beginning of period	1,861	1,621
Cash and cash equivalents, end of period	$1,619	$1,442

Basis Of Presentation

Basis Of Presentation
	3 Months Ended Mar. 31, 2010
Notes to Financial Statements [Abstract]
Basis of Presentation	Note 1: Basis of Presentation The accompanying Unaudited Consolidated Condensed Financial Statements of Cameron International Corporation (the Company) have been prepared in accordance with Rule10-01 of Regulation S-X and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Those adjustments, consisting of normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the financial information for the interim periods, have been made. The results of operations for such interim periods are not necessarily indicative of the results of operations for a full year. The Unaudited Consolidated Condensed Financial Statements should be read in conjunction with the Audited Consolidated Financial Statements and Notes thereto filed by the Company on Form 10-K for the year ended December 31, 2009. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include, but are not limited to, estimates of total contract profit or loss on certain long-term production contracts, estimated losses on accounts receivable, estimated realizable value on excess and obsolete inventory, contingencies, including tax contingencies, estimated liabilities for litigation exposures and liquidated damages, estimated warranty costs, estimates related to pension accounting, estimates related to the fair value of reporting units for purposes of assessing goodwill for impairment, estimated proceeds from assets held for sale and estimates related to deferred tax assets and liabilities, including valuation allowances on deferred tax assets. Actual results could differ materially from these estimates.

Acquisitions

Acquisitions (Unaudited)
	3 Months Ended Mar. 31, 2010
Notes to Financial Statements [Abstract]
Acquisitions (Unaudited)	Note 2: Acquisitions On February 5, 2010, the Company acquired 51% of Newco Valves, LLC (Newmans) for a total cash purchase price of $27.9 million, net of cash acquired.Theacquisition strengthens the Companys presence in the downstream valve market, particularly in the gate, globe and check valve product lines. Under the terms of the acquisition, the Company has the right to purchase the remaining 49% interest in Newmanson December 15, 2011, December 31, 2012 or December 31, 2013 and is required to purchasesuch remaining intereston January 31, 2015. The Company has included the financial results of Newmans in its consolidated financial statements in the Valves Measurement (VM) segment for the period subsequent to the acquisition date and has reflected a liability in its consolidated balance sheet for the fair value of the remaining 49% interest in Newmans it is required to purchase.The Company is still awaiting significant information relating to the value of Newmans' assets and liabilities in order to finalize its purchase price allocation. As discussed in more detail in the Companys Annual Report on Form 10-K for the year ended December 31, 2009, the Company acquired 100% of the outstanding stock of NATCO Group Inc. (NATCO) on November 18, 2009.The Company made a preliminary allocation of the purchase price at the time of acquisition based on preliminary valuations of the assets and liabilities acquired.The Company is still awaiting certain information to finalize its preliminary estimates and assumptions related to the fair value of inventory, property, plant and equipment, identifiable intangible assets, goodwill, certain pre-acquisition contingencies and related adjustments to deferred taxes.

Restructuring Expense and Acqui

Restructuring Expense and Acquisition Related Costs
	3 Months Ended Mar. 31, 2010
Notes to Financial Statements [Abstract]
Restructuring Expense and Acquisition Related Costs	Note 3: Restructuring Expense and Acquisition Related Costs During the three months ended March 31, 2010, the Company incurred a total of $10.3 million of restructuring and acquisition-related costs, including (i) $7.5 million of employee severance and other facility-related costs associated with restructuring of the Companys operations in response to changes in marketconditionsand(ii) $2.8 million of costs incurredfortheacquisition of Newmans and other costs related to the integration of NATCOs operations with the existing operations of the Company.

Receivables

Receivables
	3 Months Ended Mar. 31, 2010
Notes to Financial Statements [Abstract]
Receivables	Note 4: Receivables Receivables consisted of the following (in millions): March 31, 2010 December 31, 2009 Trade receivables $ 827.7 $ 907.1 Other receivables 84.8 67.7 Allowance for doubtful accounts (8.8 ) (15.8 ) Total receivables $ 903.7 $ 959.0

Inventories

Inventories
	3 Months Ended Mar. 31, 2010
Notes to Financial Statements [Abstract]
Inventories	Note 5: Inventories Inventories consisted of the following (in millions): March 31, 2010 December 31, 2009 Raw materials $ 168.9 $ 168.6 Work-in-process 515.2 484.0 Finished goods, including parts and subassemblies 1,201.3 1,167.8 Other 11.0 11.5 1,896.4 1,831.9 Excess of current standard costs over LIFO costs (95.0 ) (108.8 ) Allowances (65.3 ) (58.9 ) Total inventories $ 1,736.1 $ 1,664.2

Plant and Equipment and Goodwil

Plant and Equipment and Goodwill
	3 Months Ended Mar. 31, 2010
Notes to Financial Statements [Abstract]
Plant and Equipment and Goodwill	Note 6: Plant and Equipment and Goodwill Plant and equipment consisted of the following (in millions): March 31, 2010 December 31, 2009 Plant and equipment, at cost $ 2,130.9 $ 2,107.4 Accumulated depreciation (940.1 ) (915.0 ) Total plant and equipment $ 1,190.8 $ 1,192.4 Changes in goodwill during the three months ended March 31, 2010 were as follows (in millions): Balance at December 31, 2009 $ 1,441.6 Changes primarily associated with adjustments to prior period purchase price allocations 22.5 Translation and other (11.7 ) Balance at March 31, 2010 $ 1,452.4

Accounts Payable and Accrued Li

Accounts Payable and Accrued Liabilities
	3 Months Ended Mar. 31, 2010
Notes to Financial Statements [Abstract]
Accounts Payable and Accrued Liabilities	Note 7: Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities consisted of the following (in millions): March 31, 2010 December 31, 2009 Trade accounts payable and accruals $ 440.1 $ 549.7 Salaries, wages and related fringe benefits 151.9 228.3 Advances from customers 939.0 1,052.0 Sales-related costs and provisions 67.3 70.5 Payroll and other taxes 53.9 58.5 Product warranty 38.8 45.6 Fair market value of derivatives 9.9 6.1 Other 260.7 197.5 Total accounts payable and accrued liabilities $ 1,961.6 $ 2,208.2 Activity during the three months ended March 31, 2010 associated with the Companys product warranty accruals was as follows (in thousands): Balance December 31, 2009 Net warranty provisions Charges against accrual Translation and other Balance March 31, 2010 $ 45.6 $ 3.0 $ (9.6 ) $ (0.2 ) $ 38.8

Debt

Debt
	3 Months Ended Mar. 31, 2010
Notes to Financial Statements [Abstract]
Debt	Note 8: Debt The Companys debt obligations were as follows (in millions): March 31, 2010 December 31, 2009 Senior notes, net of $1.9 of unamortized original issue discount at March 31, 2010 and December 31, 2009 $ 748.1 $ 748.1 Convertible debentures, net of discount of $18.9 at March 31, 2010 ($22.8 at December 31, 2009) 481.1 477.2 Other debt 21.1 16.8 Obligations under capital leases 12.9 12.4 1,263.2 1,254.5 Current maturities (6.2 ) (22.2 ) Long-term portion $ 1,257.0 $ 1,232.3 The Companys 2.5% Convertible Debentures are accounted for under accounting rules for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) as contained in the Accounting Standards Codification of the Financial Accounting Standards Board (FASBs ASC).The Company had outstanding in certain prior periods 1.5% Convertible Debentures which were also subject to these accounting rules.The accounting rules require the Company to separately account for the liability and equity components of its convertible debt instruments in a manner that reflects the Companys non-convertible debt borrowing rates when interest cost is recognized.Specifically, the accounting rules require bifurcation of a component of the debt, classification of that component in equity and the accretion of the resulting discount on the debt as a component of interest expense.The bifurcation of the debt and equity components was based on estimated market borrowing rates of 5.9% and 4.85%, respectively, for non-convertible debt instruments similar to the 2.5% and 1.5% Convertible Debentures.The bifurcation resulted in approximately $65.8 million being included in capital in excess of par value on the Companys Consolidated Balance Sheets at March 31, 2010 andDecember 31, 2009, related to the initial conversion value of the Companys 2.5% and 1.5% Convertible Debentures.The discount on the 2.5% Convertible Debentures remaining at March 31, 2010 from the initial bifurcation of the conversion value was $18.9 million, which will be fully amortized to interest expense by June 15, 2011.In addition to the expense associated with the stated interest rates on the debt, an additional amount of interest expense, totaling $3.9 million and $4.1 million, has been recognized for the periods ended March 31, 2010, and 2009, respectively, relating to the amortization of the remaining discount on the convertible debentures that is intended to result in a rate of interest expense recognized in the Companys Consolidated Results of Operations for each year that approximates the estimated market borrowing rates for non-convertible debt instruments as shown above.Had the 2.5% Convertible Debentures been convertible at March 31, 2010 (which they were not under the terms of the debenture agreement), the Company could have been required to issue approximately 2,466,911 shares of its common stock in satisfaction of the conversion value of the debentures in excess of their principal amount based on the closing price of the Companys common stock of $42.86. At March 31, 2010, the Company had no borrowings outstanding unde

Income Taxes

Income Taxes
	3 Months Ended Mar. 31, 2010
Notes to Financial Statements [Abstract]
Income Taxes	Note 9: Income Taxes The Companys effective tax rate for the first quarter of 2010 was 25.0% compared to 31.5% during the first quarter of 2009.The decrease in the effective rate was dueprincipallyto changes in the Companys international structure implemented during 2009, aswell as the overall mix of earnings in the jurisdictions in which the Company operates.

Business Segments

Business Segments
	3 Months Ended Mar. 31, 2010
Notes to Financial Statements [Abstract]
Business Segments	Note 10: Business Segments The Companys operations are organized into three separate business segments Drilling Production Systems (DPS), VM and Compression Systems (CS). Summary financial data by segment is as follows (in millions): Three Months Ended March 31, 2010 2009 Revenues: DPS $ 943.5 $ 805.3 VM 299.0 316.1 CS 104.2 135.6 $ 1,346.7 $ 1,257.0 Income (loss) before income taxes: DPS $ 158.3 $ 164.2 VM 48.9 59.7 CS 13.8 16.3 Corporate other (60.5 ) (72.9 ) $ 160.5 $ 167.3 Corporate other includes expenses associated with the Companys Corporate office, all of the Companys interest income and interest expense, certain litigation expense managed by the Companys General Counsel, foreign currency gains and losses from certain intercompany lending activities managed by the Companys centralized Treasury function, all of the Companys restructuring expense and acquisition-related costs and all stock compensation expense.

Earnings Per Share

Earnings Per Share
	3 Months Ended Mar. 31, 2010
Notes to Financial Statements [Abstract]
Earnings Per Share	Note 11: Earnings Per Share The calculation of basic and diluted earnings per share for each period presented was as follows (dollars and shares in millions, except per share amounts): Three Months Ended March 31, 2010 2009 Net income $ 120.4 $ 114.6 Average shares outstanding (basic) 244.4 216.9 Common stock equivalents 2.5 1.6 Incremental shares from assumed conversion of convertible debentures 2.1 1.5 Diluted shares 249.0 220.0 Basic earnings per share $ 0.49 $ 0.53 Diluted earnings per share $ 0.48 $ 0.52 The Companys 1.5%Convertible Debentureswere included in the calculation of diluted earnings per share for the three months ended March 31, 2009, since the average market price of the Companys common stock exceeded the conversion value of the debentures during that period.The Companys 2.5% Convertible Debentures have been included in the calculation of diluted earnings per share for the three months ended March31, 2010 for the same reason. During the three-month periods ended March 31, 2010 and March 31, 2009, the Company acquired 1,000,000and 347,678 treasury shares at an average cost of $42.23 and $20.29 per share, respectively.A total of 245,292 and 407,012 treasury shares were issued during the three-month periods ended March 31, 2010 and 2009, respectively, in satisfaction of stock option exercises and vesting of restricted stock units.

Comprehensive Income

Comprehensive Income
	3 Months Ended Mar. 31, 2010
Notes to Financial Statements [Abstract]
Comprehensive Income	Note 12: Comprehensive Income The amounts of comprehensive income for the three months ended March 31, 2010 and 2009 were as follows (in millions): Three Months Ended March 31, 2010 2009 Net income per Consolidated Condensed Results of Operations $ 120.4 $ 114.6 Foreign currency translation loss (55.4 ) (45.8 ) Amortization of net prior service credits related to the Companys pension andpostretirement benefit plans, net of tax (0.1 ) (0.1 ) Amortization of net actuarial losses related to the Companys pension and postretirement benefit plans, net of tax 0.9 0.5 Change in fair value of derivatives accounted for as cash flow hedges, net of tax (2.4 ) (4.1 ) Comprehensive income $ 63.4 $ 65.1 The components of accumulated other elements of comprehensive income (loss) at March 31, 2010 and December 31, 2009 were as follows (in millions): March 31, 2010 December 31, 2009 Accumulated foreign currency translation gain $ 26.2 $ 81.6 Prior service credits, net, related to the Companys pension and postretirement benefit plans, net of tax 3.0 3.1 Actuarial losses, net, related to the Companys pension and postretirement benefit plans, net of tax (61.7 ) (62.6 ) Change in fair value of derivatives accounted for as cash flow hedges, net of tax(1) (15.0 ) (12.6 ) Accumulated other elements of comprehensive income (loss) $ (47.5 ) $ 9.5 (1) Approximately $10.7 million (after tax) of accumulated other elements of comprehensive loss is expected to be recognized as a reduction in earnings during the twelve-month period ending March 31, 2011.

Contingencies

Contingencies
	3 Months Ended Mar. 31, 2010
Notes to Financial Statements [Abstract]
Contingencies	Note 13: Contingencies The Company is subject to a number of contingencies, including litigation,tax contingencies and environmental matters. Deepwater Horizon Incident A blowout preventer originally manufactured by the Company was deployed by the drilling rig Deepwater Horizon when it experienced an explosion and fire on April 20, 2010, resulting in loss of life, a discharge of hydrocarbons in the Gulf of Mexico and the ultimate loss of the rig.This event and its causes are being jointly investigated by the United States Department of Homeland Security and Department of the Interior.The Company has been named as one ofa number ofdefendants ina number of suits seeking damages for personal injury and damages sufferedas a result of the discharge of hydrocarbons into the Gulf of Mexico. The legal actions involving claims against the Company arising out of this incident of which the Company is aware at the time of preparation of this Quarterly Report on Form 10-Q are: Acy J. Cooper and Ronnie Lewis Anderson vs. BP p.l.c., et. al., including Cameron International Corporation (U.S. District Court, Eastern Dist. of Louisiana), filed on April 28, 2010, requesting class action status on behalf of all Louisiana residents who suffer legally recognizable damages; Stephen Stone and Sara Stone vs. Transocean Offshore Deepwater Drilling, Inc., et. al., including Cameron International Corporation (Harris Cty. Dist. Ct., 234th Jud. Dist.), filing date unknown, seeking damages for personal injury; and James F. Mason, individually and on behalf of KJ Inc. vs. Transocean Ltd., et. al., including Cameron International Corporation (U.S. Dist. Ct., Southern Dist. of Alabama), filed April 29, 2010, seeking damages for business interruption and diminution of property values. Until the investigation referred to aboveis completed, we are unable to predict whether the Company has any liability, and if so, the possible extent of any such liability. The Company has commercial general liability insurance coverage of $500 million available to respond to any claims against the Company should any be made. Other Litigation In 2001, the Company discovered that contaminated underground water from the 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. 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 settled these claims, primarily as a result of the settlement of a class action lawsuit, and is obligated to reimburse 197 homeowners for any diminution in value of their property due to contamination concerns at the time of any sale. Based upontesting resultsin 2009 of monitoring wells on the southeastern border of the plume, the Companynotified at that time 33 homeowners whose property is adjacent to the class area that their property may be affected.The Company is taking remedial measures to prevent these properties from being affected. The Company believes, based on its review of the facts and law, that any pote

Fair Value of Financial Instrum

Fair Value of Financial Instruments
	3 Months Ended Mar. 31, 2010
Notes to Financial Statements [Abstract]
Fair Value of Financial Instruments	Note 14: Fair Value of Financial Instruments The Companys financial instruments consist primarily of cash and cash equivalents, trade receivables, trade payables, derivative instruments and debt instruments. The book values of cash and cash equivalents, trade receivables, trade payables, derivative instruments and floating-rate debt instruments are considered to be representative of their respective fair values. Certain cash equivalents have also been valued based on quoted market prices, which are considered to be Level 1 market inputs as defined in the fair value measurements guidance of the FASBs ASC. In order to mitigate the effect of exchange rate changes, the Company will often attempt to structure sales contracts to provide for collections from customers in the currency in which the Company incurs its manufacturing costs. In certain instances, the Company will enter into forward foreign currency exchange contracts to hedge specific large anticipated receipts or disbursements in currencies for which the Company does not traditionally have fully offsetting local currency expenditures or receipts. The Company was party to a number of long-term foreign currency forward contracts at March 31, 2010, some of which extend through 2011. The purpose of the majority of these contracts was to hedge large anticipated non-functional currency cash flows on major subsea, drilling, valve or other equipment contracts involving the Companys United States operations and its wholly-owned subsidiaries in Brazil, Italy, Romania, Singapore and the United Kingdom. The Company determines the fair value of its outstanding foreign currency forward contracts based on quoted exchange rates for the respective currencies applicable to similar instruments.These quoted exchange rates are considered to be Level 2 observable market inputs.Information relating to the contracts, most of which have been accounted for as cash flow hedges as of March 31, 2010, follows: Total gross volume bought (sold) by notional currency on open derivative contracts at March 31, 2010 was as follows (in millions): Notional Amount Buy Sell FX Forward Contracts: EUR 30.6 32.4 GBP 2.8 7.0 USD 8.9 102.3 FX Options: USD - 2.5 The Company was also party to two interest rate swaps for a total U.S. dollar notional amount of $400.0 million at March 31, 2010, that mature on January 15, 2012.The Company uses interest rate swaps to achieve an overall desired position of fixed and floating rates on its outstanding debt.The fair value of the interest rate swaps is affected by changes in quoted three-month London Interbank Offered Rates (LIBOR), which is considered to be a Level 2 observable market input. The fair values of derivative financial instruments recorded in the Companys Consolidated Condensed Balance Sheets at March 31, 2010 and December 31, 2009 was as follows (in millions): Asset Derivates Liability Derivatives Fair Value Fair Value Balance sheet location March 31, 2010 December 31, 2009 Balance sheet location March 31, 2010 December 31, 2009 Derivatives designated as hedging in

Document Information

Document Information
	3 Months Ended Mar. 31, 2010
Document Information [Text Block]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-03-31

Entity Information

Entity Information (USD $)
	3 Months Ended Mar. 31, 2010	Apr. 23, 2010	Jun. 30, 2009
Entity [Text Block]
Entity Registrant Name	CAMERON INTERNATIONAL CORP
Entity Central Index Key	0000941548
Current Fiscal Year End Date	--12-31
Entity Well Known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$5,041,455,418
Entity Common Stock Shares Outstanding		244,200,761
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1