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Additional information about the Company is available on Cooper Cameron’s home page

at www.coopercameron.com.

C O O P E R C A M E R O N

Cooper Cameron is a leading international manufacturer of oil

and gas pressure control 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. Cooper Cameron is also a leading manufacturer of

centrifugal air compressors, integral gas compressors and turbochargers.

D I R E C T O R S

Sheldon R. EriksonChairman of the Board,President and ChiefExecutive Officer,Cooper CameronCorporationHouston, Texas

Nathan M. AveryInvestorHouston, Texas

C. Baker CunninghamChairman, President and Chief Executive Officer,Belden Inc.St. Louis, Missouri

Grant A. DoveManaging Partner,Technology Strategies & AlliancesDallas, Texas

Michael E. PatrickVice President and ChiefInvestment Officer,Meadows Foundation, Inc.Dallas, Texas

David Ross IIIInvestorHouston, Texas

Michael J. SebastianExecutive Vice President(retired),Cooper Industries, Inc.Houston, Texas

COOPER CAMERONCORPORATION

Sheldon R. EriksonChairman, President and Chief Executive Officer

Thomas R. HixSenior Vice President and Chief Financial Officer

R. Scott AmannVice President,Investor Relations

Joseph D. ChamberlainVice President and Corporate Controller

Jane L. CrowderVice President,Human Resources

William D. GivensVice President, Taxes

Michael C. JenningsVice President and Treasurer

William C. LemmerVice President, General Counseland Secretary

Cameron

Dalton L.ThomasPresident‡

Steven P. BeattyVice President, Finance

Steve E. EnglishVice President, CAMSERV

Hal J. GoldieVice President and GeneralManager, Eastern Hemisphere

Hunter W. JonesVice President, Quality andGlobal Procurement

Jack B. MooreVice President and GeneralManager, Western Hemisphere

J. Gilbert NanceVice President,Drilling Business

Erik PeyrerVice President and General Manager, Asia Pacificand Middle East

S. Joe VinsonVice President,Human Resources

Edward E.WillVice President, Surface andSubsea Business

Cameron Controls

Donald J. SchortgenVice President

Cameron Willis Chokes

Peter J. LangVice President

Cooper Cameron Valves

A. John ChapmanPresident‡

Harold E. Conway, Jr.Vice President, Operations

William B. FindlayVice President and General Manager, Europe,Africa, Middle East

David R. MeffordVice President, Engineering

T. Duane MorganPresident, Orbit Valve Company

Luis O. OrtizVice President, Global BusinessDevelopment

Richard A. SteansVice President, Finance

James E.WrightVice President, Marketing andNorth America Sales

Cooper Energy Services

Franklin MyersPresident*

Richard LeongVice President, Marketing and Sales, Reciprocating

Robert D. MillerVice President, Sourcing and Productivity Operation

Floyd C.TinneyVice President, Finance

Cooper TurbocompressorRobert J. RajeskiPresident‡

Jeffrey G. AltamariVice President, Finance

Frank H. AthearnVice President,Sales and Marketing

John C. BartosVice President, Engineering

‡ Also, Vice President,Cooper Cameron Corporation

* Also, Senior Vice President,Cooper Cameron Corporation

O F F I C E R S

Where Tradition and Technology

Come Together

F I N A N C I A L H I G H L I G H T S

($ thousands except per share, number of shares and employees)

T A B L E O F C O N T E N T S

Company Profile . . . . . . . . . . . . . . . . . . . . . . . 2

Letter to Stockholders . . . . . . . . . . . . . . . . . . . 3

Cameron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Cooper Cameron Valves . . . . . . . . . . . . . . . . . .14

Cooper Energy Services . . . . . . . . . . . . . . . . . .18

Cooper Turbocompressor . . . . . . . . . . . . . . . . .22

Management’s Discussion and Analysis . . . . . .25

Report of Independent Auditors . . . . . . . . . . . .33

Consolidated Financial Statements . . . . . . . . . .34

Notes to Consolidated Financial Statements . . .38

Selected Financial Data . . . . . . . . . . . . . . . . . .55

Stockholder Information . . . . . . . . . . . . . . . . . .56

Years ended December 31: 2000 1999 1998

Revenues1 $ 1,386,709 $ 1,475,061 $ 1,893,311

Gross margin 411,912 398,785 552,589Earnings before interest, taxes,

depreciation and amortization (EBITDA)2 214,531 193,051 322,879EBITDA (as a percent of revenues) 15.5% 13.1% 17.1%Net income 27,660 43,002 136,156 Net income2 84,224 54,688 151,682Earnings per share

Basic 0.52 0.81 2.58Diluted 0.50 0.78 2.48Diluted2 1.53 1.00 2.76

Shares utilized in calculation of earnings per shareBasic 52,800,000 53,328,000 52,857,000Diluted 55,013,000 54,848,000 54,902,000

Capital expenditures 66,599 64,909 115,469Return on average common equity2 10.6% 7.0% 21.7%

As of December 31:

Total assets $ 1,493,873 $ 1,470,719 $ 1,823,603Total debt 192,272 210,332 413,962Total debt-to-capitalization 18.6% 22.8% 34.7%Stockholders’ equity 842,279 714,078 780,285Shares outstanding 54,011,929 50,567,959 53,259,620Net book value per share 15.59 14.12 14.65Number of employees 7,300 7,200 9,300

1 Revised to reclassify shipping and handling costs from revenues to cost of sales.

2 Calculated excluding nonrecurring/unusual charges.

1

Provides pressure control systems, equipment and services for oil and gas drilling and production in onshore, offshore and subsea applications.

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Provides products and services tothe oil and gas production, gastransmission and process markets.

Surface and subseaproduction systems,blowout preventers,drilling and productioncontrol systems, gatevalves, actuators,chokes, wellheads,drilling and productionriser and aftermarketparts and services.

Oil and gas majors,independent producers,engineering and construction companies,drilling contractors,rental companies andgeothermal energyproducers.

Oil and gas majors,independent producers,gas transmission companies, equipmentleasing companies andindependent powerproducers.

Integral engine-compressors, reciprocating compressors, turbochargers, control systems and aftermarketparts and services.

Integrally geared centrifugal compressors,compressor systemsand controls. Completeaftermarket servicesincluding spare parts,technical services,repairs, overhauls andcompressor upgradeengineering.

Petrochemical andrefining companies,durable goods manufacturers, basicresource, utility, airseparation and chemicalprocess companies.Specific focus onautomotive, glass, textile, electronics, food,container, pharmaceuticaland other companiesthat require oil-freecompressed air.

Provides products and services tothe gas and liquids pipelines, oiland gas production and industrialprocess markets.

Gate valves, ballvalves, butterfly valves,Orbit valves, rotaryprocess valves, block& bleed valves, plugvalves, actuators,chokes, and aftermarketparts and services.

Oil and gas majors,independent producers,engineering and construction companies,pipeline operators,drilling contractors and major chemical, petrochemical andrefining companies.

Manufactures and services centrifugal air compression equipment for manufacturing and process applications.

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P R O D U C T S C U S T O M E R S




C O M P A N Y P R O F I L E

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T O T H E S T O C K H O L D E R S O F C O O P E R C A M E R O N

Financial performance

improves over prior year

Revenues totaled $1.39 billion for 2000, down

almost six percent from 1999’s $1.48 billion. 1999

results, however, included $93 million in rev-

enues from the rotating compressor business,

which we sold at the end of last year’s third quarter.

Despite the lower revenue base, earnings before

interest, taxes, depreciation and amortization

(EBITDA) were up by approximately 11 percent,

to $215 million compared with last year’s $193

million. Earnings per share, excluding nonrecur-

ring items, increased from $1.00 to $1.53, up 53

percent from 1999. The percentage increase in

EPS exceeded that of EBITDA, primarily because

of lower interest expense as a result of our having

reduced debt with the proceeds from the sale of

the rotating business, as well as the absence of

depreciation and amortization associated with

that business.

Recovery under way,

but at modest pace

Oil and gas prices rose during 2000 to the high-

est levels seen in the past decade. Oil prices spent

most of the second half of the year above $30 per

barrel before returning to a more moderate level

in the high 20s by year-end. Natural gas prices

rose steadily throughout the year, and with the

approaching winter months, broke the $10 per

mcf barrier on the futures market. Oil and gas

markets have clearly uncoupled, with oil remain-

ing a global commodity and North American

natural gas demand being influenced more and

more by growing electric power markets fueled by

natural gas.

Many expected higher prices to be the catalyst

for a rapid recovery in drilling and development

activity by energy producers worldwide.

Although that has been true among certain

customers focusing on natural gas in North

We began 2000 with hopes that 1999’s resurgence in oil and gas prices would be sustained

at levels that would support a much-anticipated recovery in spending by our customers.

Midway through, we were encouraged by the demand/supply scenario that appeared to

support a long-term stabilization of prices. By year-end, we were surprised that activity had

not accelerated more strongly and that our backlog remained relatively constant, rather than

increasing. While our order book did not grow as briskly as we originally expected and would

have liked, Cooper Cameron’s profits showed steady improvement during the year.

America, higher oil prices have not generated

similar increases in spending in most interna-

tional markets. Mergers among major producers,

uncertainty about future hydrocarbon prices,

cautious economic assumptions on large develop-

ment projects and a measured approach to doing

business in new international arenas like West

Africa appeared to instill an extreme sense

of conservatism in many of our customers

during the year.

We like the feel of this energy market. We

believe that the current pace of activity is con-

ducive to a sustained upcycle, and will bring

about a relatively longer-term recovery. Spending

by our primary customers is forecast to increase

by approximately 20 percent during 2001; we

expect to capture a reasonable share of that incre-

mental business.

Six Sigma program begins

In September 2000, Cooper Cameron initiated

its Six Sigma program, with a goal of improving

manufacturing and service results across each of

the Company’s divisions. Six Sigma has been

successfully implemented in numerous world-

class companies, and the standards and practices

are well-suited to Cooper Cameron’s quality and

customer service goals.

While Six Sigma’s literal definition offers a

statistical measure of variation from the norm,

the program uses selected tools for evaluating,

measuring and, most importantly, improving

processes within an organization. Customer

needs and expectations become the focus of the

manufacturing or service effort; data are accumu-

lated to measure performance versus standards,

and opportunities are identified for improving

that performance; and resources are allocated to

aggressively address the opportunities.

The most important resources for the program

are the people who execute the plan. Cooper

Cameron began training key personnel in Six

Sigma practices in late 2000, and there are already

more than 50 projects under way in the various

divisions.

We expect these projects to generate meaning-

ful contributions to earnings over the next several

years. This will be an ongoing business practice,

not a short-term program.

This effort, combined with Cooper Cameron’s

long-time emphasis on quality programs and

“best practices” initiatives, is expected to give rise

to significant improvements in business processes,

customer satisfaction and overall profitability.

Restructuring expected to

be completed by mid-year 2001

We recorded significant nonrecurring charges

during 2000 related to ongoing restructuring

activity in our businesses, particularly in the

Cooper Energy Services (CES) operations. We

recognized more than $77 million in nonrecur-

ring charges during the year, including nearly $37

million in non-cash write-offs of assets. About 87

percent of the charges were related to CES.

Included were remaining costs from the 1999

decision to close the Grove City, Pennsylvania

4

EBITDA($ millions)

96 97 98 99 00

$183

$294

$323

$193 $2

15

Revenues($ millions)

96 97 98 99 00

$1,3

95

$1,8

17

$1,8

93

$1,4

75

$1,3

87

5

EBITDA(as a percent of revenues)

96 97 98 99 00

13.1

%

16.2

%

17.1

%

13.1

% 15.5

%

facility; the transfer of equipment and operations

from Mount Vernon, Ohio to other locations,

including our new facility in Waller, Texas, west of

Houston; and our recent decision to exit the

Superior gas engine line and close CES’

Springfield, Ohio plant. That process will continue

into the first half of 2001 and require additional

charges along the way. Closing these old and

expensive facilities clearly benefits us financially,

and our product and market positions will be

strengthened for the future. Other charges during

2000 were related to facility closure, restructuring

and workforce reductions in a variety of Cameron

locations, and there were some modest costs associ-

ated with Cooper Cameron Valves (CCV) and

Cooper Turbocompressor (CTC).

We separate these charges from our operating

results because they do not represent an ongoing

component of doing business and they stem from

actions separate from day-to-day operations.

Still, we cringe every time we characterize these

items as nonrecurring or unusual, simply because

they seem to have become a too-regular part of

our financial reporting. One of our goals during

the first half of 2001 is to record the last of such

charges. We can’t guarantee there will be no more

similar charges, but we’ll do our best to wrap up

the restructuring process as quickly as possible.

Still, when we see substantial opportunities to

improve our business, we won’t hesitate to take

decisive action.

Taking advantage of a

healthy balance sheet

At year-end, our balance sheet was as strong as

it’s ever been. Total debt was down to $192 mil-

lion, and our debt-to-capitalization ratio was 18.6

percent. We will continue to seek out acquisition

opportunities, subject to our usual standards of

strategically fitting within the current framework

of our businesses. Such opportunities are difficult

to find in a market where the prospects appear so

encouraging for potential sellers.

We may also choose to again repurchase our

own common shares. We bought approximately

3.5 million shares at the end of 1999, at an aver-

age cost of about $28 per share. One of our stated

objectives is to control our share count through

repurchases, and we would certainly look on any

decline in the stock price as an opportunity to

reenter that market.

Encouraging performances

We spend a lot of time dealing with challenges

across our businesses, and we sometimes forget to

acknowledge the successes. Examples of these can

be found throughout our operations.

Cameron remains the primary driver of our

operating and financial performance, and contin-

ues to raise the bar for performance as an indus-

try leader. Cameron’s worldwide aftermarket

initiative, CAMSERVTM, has reinforced Cameron’s

role as an industry leader in parts and service, and

boosted the aftermarket business to more than

one-third of Cameron’s revenues. We remain aCapital Expenditures

($ millions)

96 97 98 99 00

$37

$72

$115

$65

$67

6

Orders($ millions)

96 97 98 99 00

$1,4

97

$1,8

94

$1,8

43

$1,3

03

$1,4

06

Backlog(at year-end, $ millions)

96 97 98 99 00

$728 $7

86

$790

$513

$528

leading supplier of subsea trees and associated

components for deepwater well completions, and

our blowout preventers and related drilling con-

trols systems are market leaders as well. And in

the surface business—which includes production

equipment installed both on land and on offshore

platforms—we continue to hold the top market

share position worldwide.

One of the greatest challenges at CES is dealing

with demand for Ajax integral engine-compressor

units. North American gas activity has stimulated

customer interest in these gas compression packages.

Cooper Turbocompressor (CTC) began an

active aftermarket development effort last year,

leveraging off its significant base of installed

equipment, and customer response has been

extremely encouraging. The combination of

maintenance agreements, OEM parts and

enhanced products and services are generating

revenues in an area previously untapped by CTC.

Prepared for the recovery (still)

In my letter last year, I described how we had

taken steps that would prepare us for the

inevitable return to higher activity levels, driven

by increased oil and gas prices. Included in that

preparation was nearly $100 million of research

and development spending over the past three

years. We share the general industry view that

spending on oil and gas exploration and develop-

ment has not increased as quickly as most of us

had anticipated. While the demand for our

equipment and services was not as robust as we

expected, our earnings per share increased by

more than 50 percent during 2000, and we expect

our financial performance to improve again dur-

ing 2001. Meanwhile, the pace of activity in the

energy business, coupled with OPEC’s apparent

discipline and a healthy North American gas market,

is fueling what should be an extended upcycle.

In closing…

During Cooper Cameron’s first five years as a

public company, we experienced a full cycle in the

oil service business. We saw activity ramp up

quickly from 1995 to 1997; dealt with the slow-

down, beginning in late 1997 and extending

throughout 1998; and have seen higher prices and

growing demand for oil and gas lay the ground-

work for the current recovery, which is now into

its second year.

While the Cooper Cameron name is a relative

newcomer to the industry, our products and rep-

utation are not. We have an outstanding base of

loyal customers, and we’re grateful for every one

of them. Similarly, and not coincidentally, we

have a very talented group of people who evalu-

ate, plan and execute our business strategies year

after year—and many of them have been doing so

through several oil and gas cycles. Most of them

are also Cooper Cameron shareholders; so their

goals are faithfully aligned with yours and mine.

They deserve our collective thanks.

Lastly, I want to express my personal thanks to

one of our directors, who will retire from our

board at this year’s annual meeting. Michael J.

Sebastian has been on our board since Cooper

Cameron’s formation in 1995, and we were

fortunate to reap the benefits of his leadership

and experience over the past five years.

On behalf of Cooper Cameron’s employees, we

appreciate your support, and we will do our best

to continue the standards of performance and

profitability your Company has established.

7

Sincerely,

Sheldon R. Erikson

Chairman of the Board,

President and Chief Executive Officer

C A M E R O N

S T A T I S T I C A L / O P E R A T I N G H I G H L I G H T S2000

Cameron is one of the world’s leading providers of

systems and equipment used to control pressures

and direct flows of oil and gas wells. Products

include wellheads, Christmas trees, controls, chokes,

blowout preventers and assembled systems,

employed in a wide variety of operating

environments—basic onshore fields, highly

complex onshore and offshore environments,

deepwater subsea applications and ultra-high

temperature geothermal operations.

9

($ millions) 2000 1999 1998

Revenues1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $838.3 $817.1 $1,024.7

EBITDA2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148.7 139.3 215.0

EBITDA (as a percent of revenues) . . . . . . . . . . . . . . . . . . . . . . 17.7% 17.0% 21.0%

Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38.6 38.8 82.0

Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 851.4 619.5 1,074.9

Backlog (as of year-end). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372.3 367.0 592.6


2 Excludes nonrecurring/unusual charges.


98 99 00

$1,0

25

$817

$838

EBITDA($ millions)

98 99 00

$215

$139 $1

49

Orders($ millions)

98 99 00

$1,0

75

$620

$851


98 99 00

$593

$367

$372

The model “TL” is a lightweight version of the industry’smost popular and widely used ram-type blowout preventer.

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Financial overview

Cameron’s revenues increased to $838.3million in 2000, up three percent from$817.1 million in 1999. EBITDA (excludingnonrecurring charges) was up from year-ago levels, reaching $148.7 million,compared with 1999’s $139.3 million.EBITDA as a percent of revenues was 17.7percent, up from 17.0 percent.

Drilling

Cameron provides surface and subseablowout preventer (BOP) stacks, drillingriser, drilling valves and choke and killmanifolds, as well as hydraulic and multi-plexed electro-hydraulic (MUX) controlsystems used to operate surface and subseaBOP stacks, to multiple customers in thedrilling business worldwide. Cameronalso provides complete aftermarket servicesunder the CAMSERV™ brand andreplacement parts for drilling equipment,including elastomer products specificallydesigned for drilling applications andmanufactured at Cameron’s state-of-the-art Elastomer Technology facility.

Cameron’s drilling business remainscommitted to providing innovative systemssolutions to allow safer, more cost-effectiveand reliable drilling for its global customers.

Drilling business revenues decreased in2000 compared with 1999, as large-boresubsea BOP stacks, MUX control systems,and drilling riser orders were substantiallycompleted and delivered for the recentnewbuild cycle of Mobile OffshoreDrilling Units. Cameron will continue to provide the best value delivered fordrilling systems, maintain its core compe-tency in this important business segment,and look to continuous improvementwith regard to reliability and availabilityof the overall system. With this in mind,a Six Sigma statistically based qualityimprovement process has been imple-mented. This process is aimed at break-through improvements in the performanceand product commercialization of thedrilling business. The first such project isscheduled for completion early in 2001.Other projects have been started or areunder review.

Cameron’s leading market position inthis business segment provides a largeinstalled base requiring aggressive world-wide aftermarket support, which results inhigher margin and better flowthroughsales volume. New business sales will con-tinue to shift from the large-bore subseaand deepwater market, which fueledmajor drilling business growth from 1997through 1999, to platform, jackup, land,and specialty blowout preventer tech-nology. For example, Cameron recentlyreceived several orders for large-bore sur-face-based BOP stacks, including severalplatform stacks to be delivered into theNorwegian market. Orders for this equip-ment are projected to be at the highestlevel since the early 1980s.

Surface

Surface equipment represents thelargest component of Cameron’s revenuebase, and includes wellheads, Christmastrees and chokes used on land or installedon offshore platforms. Cameron holdsthe leading market position in supplyingthis type of equipment. Cameron alsorecently increased its emphasis on supplyingcontrol systems for surface markets.

The oil and natural gas price recoveryhas driven improving demand forCameron’s surface products. Both majorsand independent operators in NorthAmerica spurred an increase in spendingwhich drove U.S. and Canadian rig countsto new ten-year highs, with natural gasdrilling the main driver. In this environment,Cameron’s market-leading position as thepremier supplier of high pressure surfacewellheads and trees led to record highs inNorth American surface products orders.

Tightening availability of products andpersonnel justified Cameron’s decision toimplement price increases in the NorthAmerican markets during the fourthquarter of 2000. This increase should bereflected in the Company’s results begin-ning in early 2001, and the impact shouldbecome more apparent during the year asprevious supply contracts are renewed atthe new price levels. Cameron’s focus onproduct quality and service responsivenessshould assist in the retention of price-sen-sitive customers.

Among recent operational successes,Shell Shearwater, a High Pressure/HighTemperature platform in the North Sea,was commissioned during 2000 usingCameron 5″ 15,000 psi surface Christmastrees, including Cameron wellheads, actu-ators and chokes. More recently, Cameronprovided six platform wellheads and treesand assisted in the engineering and start-up of Anadarko’s high-profile Hickoryand Tanzanite projects offshore Louisiana.Equipment for this high-pressure develop-ment was delivered on a fast-track schedule,and production began in December.

Operators and industry experts alikeremain bullish on the fundamentals fornatural gas in North America. With con-tinued high levels of drilling activityanticipated in key gas-producing regionslike the Northern Rockies, onshore and offshore Louisiana, the CanadianFoothills and South Texas, Cameron’smarket presence and quality reputationshould allow it to take full advantage ofincreasing demand for surface products.

Subsea

Subsea equipment includes systems,products and services associated withunderwater drilling and production appli-cations, including subsea wellheads, mod-ular Christmas trees, chokes, manifolds,flow bases, modular CAMTROLTM control systems, and flowline connection systems.The subsea market is another area inwhich Cameron holds a leading share ofthe installed base worldwide and is one ofthe primary providers to the industry.

Highlights of Cameron’s business in thismarket during 2000 included the awardand delivery of the Triton Energy Ceibadevelopment off Equatorial Guinea in WestAfrica. Cameron’s systems capabilitiesenabled Triton Energy to achieve first oilfrom Ceiba less than fourteen monthsafter field discovery, which set an industryrecord for a deepwater development.Cameron’s scope of work includes overallsystems engineering and project manage-

Cameron’s drilling business remains committed to providing innovative systems solutionsto allow safer, more cost-effective and reliable drilling for its global customers.

11

ment, as well as modular SpoolTrees,modular CAMTROL production controlsystems, manifolds, flow bases, subseawellheads, and pipeline connection systems. The system was designed andintegrated using MOSAICTM philosophy,Cameron’s field-proven modular buildingblock solution for subsea systems.

An equally significant project forCameron is the Shell Malampaya NaturalGas to Power Project, served by Cameron’sSingapore facility. The Malampaya devel-opment will reliably supply natural gasdirectly to three land-based power stationsthat provide more than a third of thepower requirements for the Philippines.This MOSAIC system scope of supplyincludes modular SpoolTrees, modularCAMTROL production and workovercontrol systems, subsea wellheads, chokes,manifolds, flow bases, and pipeline con-nection systems. The system is designed tobe fault-tolerant so as to ensure a highlyreliable gas supply.

Finally, the installation and start ofoperations of the Texaco Captain subseadevelopment in the United Kingdom sec-tor of the North Sea represents anothermilestone. Another MOSAIC solution,Captain’s scope of supply includesChristmas trees, modular CAMTROLproduction control systems, subsea well-heads, chokes, and a joint venture withBrown & Root providing a football field-sized unitized template manifold.

In each of these endeavors, Cameron’sresponsibilities encompassed overall systemsengineering and project execution.

In recent activity, Cameron was awardedMarathon’s Camden Hills and Total FinaElf ’s Aconcagua projects in the Gulf ofMexico. Along with the previously award-ed BP King/King’s Peak project, this willbe the deepest subsea development in theworld at water depths of more than 7,000feet, marking another Cameron first.Cameron was also awarded the subseatrees, manifolds and jumpers for BP’s Gulfof Mexico Infrastructure Lead Exploration(ILX) project,a program targeted to increaseproduction from numerous pre-existing

facilities in the Gulf. In the internationalarena, Cameron was awarded BG’sScarab/Saffron project, including subseatrees and related hardware to be installedoffshore Egypt.

Order inquiry and project planningactivity for large-scale subsea projects hasbeen at very high levels in 2000 and isexpected to continue in 2001. Projectactivity has been greatest in deepwaterareas of the Gulf of Mexico and WestAfrica. Project sanction and order book-ings have been delayed in both Nigeriaand Angola, however, due to difficulties innegotiation with host governments andstate oil companies over terms and conditions of participation and projectcontrol. Project potential for Cameronand other critical equipment suppliers isunprecedented, with individual projectsranging in size from $50 million to morethan $200 million.

Cameron Controls

Although Cameron Controls wasorganized as a separate business unit onlyfour years ago, Cameron has been in thecontrols business since the late 1970s.Drawing on a long history of research andfield experience, the Cameron Controlsorganization was formed to design, man-ufacture and service drilling, productionand workover control systems worldwide.

Its early growth was fueled by orders forMUX subsea drilling controls, combiningCameron’s reliable hydraulics with elec-tronic technology to provide the rapidactuation needed for BOPs in deepwaterdrilling applications. Upgrading Cameron’ssubsea production controls technologywith the state-of-the-art CAMTROL system was a logical extension ofCameron’s drilling controls technology.CAMTROL now incorporates Cameron’sdrilling control systems and industry-leading workover control systems.

Cameron Controls’ role as a world-classsupplier is confirmed by its current position as the leading supplier of deep-water MUX control systems to the drillingmarket. E&P operators are beginning torecognize Cameron Controls as a signifi-cant and qualified provider of productioncontrol systems worldwide. In fact, one of the supermajors awarded Cameron

Controls’ CAMTROL production controlsystem a technical rating higher than allother major competitors’ subsea productioncontrol systems. Deliveries were completedin 2000 for three major projects: ShellMalampaya, Texaco Captain and TritonEnergy Ceiba.

Recent new awards for subsea produc-tion control systems include Repsol’sChipiron project in Spain, and Petrobaltic’sdevelopment in Poland.

Cameron Controls’ two primary manu-facturing, assembly and testing facilities,in Celle, Germany and Houston, Texas,completed their second full year of opera-tion in 2000. The new facilities havesucceeded in reducing lead times, increas-ing on-time deliveries and improvingeffective manufacturing capacity. Thelocations of the two facilities allowCameron Controls to conveniently serveand support markets worldwide, includingWest Africa, the North Sea, South America,Asia Pacific and the Gulf of Mexico.

Cameron Controls expects to exploitopportunities in the controls market in several areas during 2001. CAMTROLwill be expanded to include all ofCameron’s controls capabilities, includingproduction, drilling and workover.Continued product development in sub-sea production controls, bolstered by thesuccessful installation of the projects iden-tified above, will strengthen and expandthe Company’s market position and productofferings. The common threads for allCAMTROL systems are modularity, faulttolerance and integrity assurance to pro-vide high reliability systems. The drillingcontrols focus will be on maintainingCameron’s leading market position,attained as a result of providing reliable,cost-effective systems for the BOP market,and on enhancing that position by furtherimproving the product selection toinclude innovative emerging marketdrilling controls applications. As a logicalextension of the above, aftermarket capa-bilities will be expanded in several markets,including Brazil and West Africa, in order to support the growing number ofcontrols systems installations worldwide.

The subsea market is another area in which Cameron holds a leading share of theinstalled base worldwide and is one of the primary providers to the industry.

12

Cameron Controls’ customer support andresponse effort will benefit from the relatedCAMSERV efforts and Cameron’s extensivenetwork of service facilities. As the largestglobal provider of system maintenanceand support for drilling and productionsystems, Cameron provides the depth andbreadth of facilities, equipment, personneland experience that is required of a cus-tomer-centric organization.

Cameron Willis

Cameron Willis’ product portfolioincludes Cameron and Willis branddrilling choke systems, and Cameron andWillis brand chokes and choke actuatorsfor the surface and subsea productionmarkets. Cameron Willis was created inorder to take advantage of opportunities formanufacturing consolidation, technologyimprovement and product cost reduc-tions. As a result, Cameron Willis has clearlyestablished its position as the worldwidemarket share leader in subsea chokes.

Gate valve actuator product rationaliza-tion and manufacturing consolidation,processes completed during 1999, haveresulted in lower manufacturing costs in2000. Surface gate valve actuator manu-facturing is primarily provided by theHouston operation, which now accountsfor half of the Cameron Willis shipments.Increased focus on actuator manufacturinglead times and consistently high on-timedelivery performance from CameronWillis has all but removed the delayscaused by commercial actuator manufac-turers, enabling Cameron to shorten thelead times of its Christmas trees.

Surface Safety Systems that control sur-face actuated gate valves and Christmastrees supplied by Cameron continue to bea growth market. Cameron’s leading positionin the surface production (Christmas tree)markets and operators’ desire to automatefield operations, thereby lowering operatingexpenses, make this a natural extension toCameron’s core business. Cameron is in

the unique position to supply wellheads,Christmas trees, valves, actuators, chokesand surface safety systems, the buildingblocks necessary to provide a completesingle-well surface-automated system.

Cameron Willis will continue to growwith the offshore markets as projects aredeveloped in deeper water, creating anever-increasing demand for this level oftechnology, experience and breadth ofproduct solutions. As surface and subseaproduction activity improves in the wakeof higher oil and gas prices, substantialopportunities for new orders shoulddevelop during 2001.

Aftermarket

Aftermarket revenues, which have consistently produced attractive profitmargins (as a result of customers’willingnessto share the life cycle cost reductionsachieved through the application ofCAMSERV), continued to increase as apercent of total revenue. Meanwhile,Cameron’s worldwide market share hascontinued to increase, particularly in thedrilling business.

Cameron continues to enhance its market presence worldwide. Constructionof a new joint venture facility in SaudiArabia will be completed by the end of2001 and will expand Cameron’s after-market capabilities in the Middle East.Efforts will continue to grow the aftermarketbusiness through acquisitions, increasedpenetration of existing markets and identi-fication of new markets that can be servedby Cameron’s extensive worldwide facilities.

Cameron’s CAMSERV initiatives aredesigned to provide flexible, cost-effectivesolutions to customer aftermarket needsthroughout the world. CAMSERV com-bines traditional aftermarket services andproducts, such as equipment maintenanceand reconditioning, with Cameron’s infor-mation technology toolset. As operatorscontinue to look for ways to reducedrilling, completion and production costs,additional opportunities to provide suchservices to customers will develop.

Function testing of a 4 1/16″ API 15,000 psi

Christmas tree, complete with tubing spool

and hanger, prior to shipment to Anadarko

Petroleum Corporation’s Hickory platform.

The oil and natural gas price recovery has driven improvingdemand for Cameron’s surface products.

>

C O O P E R C A M E R O N V A L V E S


Cooper Cameron Valves (CCV) is a leading provider

of valves and related systems primarily used to

control pressures and direct 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 API 6D and American National

Standards Institute (ANSI) standards.

15

($ millions) 2000 1999 1998

Revenues1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $221.1 $233.6 $311.8

EBITDA2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37.1 33.4 60.9



Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228.3 209.8 279.5





98 99 00

$312

$234

$221

EBITDA($ millions)

98 99 00

$61

$33 $3

7

Orders($ millions)

98 99 00

$280

$210 $2

28


98 99 00

$54

$32

$42Orbit high-integrity valves being readied for shipping.

Orbit’s unique block valve technology provides absolutepositive isolation for a multitude of processes in the gasprocessing, petrochemical and refining industries. TheOrbit design is particularly well-suited for applicationsdemanding long-term performance where frequent cycling and positive shutoff are of primary importance.

<

16

Financial overview

CCV’s orders were up approximatelynine percent during the year, driven primarily by growth in the oilfield market.Revenues were $221.1 million for the year,down five percent from 1999’s $233.6 million. EBITDA (excluding nonrecurringcharges) increased to $37.1 million, up 11percent from the $33.4 million of a yearago. EBITDA as a percent of revenuesincreased to 16.8 percent, up from 1999’s14.3 percent. The increased profit marginin 2000 reflects a full year’s impact of thecost reduction initiatives that were startedin 1999, significant productivity improve-ments and a price increase that was initiatedin the third quarter of 2000.

Operations restructuring was essentiallycompleted during 2000 in both Europeand North America. Some minor restruc-turing continues in the Beziers, Franceoperation, and CCV has targeted the FarEast as a location for future manufacturingdue to the low cost of labor and materialin that region.

Emphasis on subsea market

CCV’s recent product developmentefforts in the subsea market have furtherenhanced the Company’s position as anindustry technology leader. Developmentwas completed for a range of ball valvescapable of performing at pressures of10,000 psi and in water depths of 10,000feet. In addition, CCV is part of a consor-tium of industry suppliers who havedeveloped a technology that enables hottapping of pipelines in water depths downto 10,000 feet. CCV believes that it is wellpositioned to benefit from future deepwateractivity worldwide and is proving to be aleader in technology development in thiscritical environment.

Focus on aftermarket continues

Aftermarket growth continued to be a priority throughout the year, with revenues in this area more than doublingover 1999. CCV significantly expanded itsfield services efforts throughout the year,and also acquired Valve Sales Inc., aHouston-based valve repair company,in the first quarter of 2000. CCV will continue to evaluate new aftermarket ini-tiatives, including additional acquisitionsand grassroots start-ups, in both domesticand international markets.

Other growth initiatives underway

Activity in the power generation sectoris expected to be robust in 2001. Based ona bullish construction outlook, CCV isdedicating additional resources to salesefforts in this market segment. In addition,CCV plans to introduce a low-cost butterflyvalve as part of the Company’s efforts tobroaden its product line. This valve willcomplement CCV’s existing high-per-formance butterfly valve and will be soldinto the industrial and oilfield markets.

Investment in web-based technology

CCV views web-enabled electroniccommerce as a powerful tool in streamliningoperations and communicating with thecustomer. In addition to its existing web-site and participation in the OFS Portalinitiative, CCV intends to launch a valveconfigurator and quotes management systemfor use by both CCV’s internal sales groupand customers. Both products will enhancethe ease of doing business with CCV.

Foreign sourcing and productivity improvements

In addition to the Six Sigma program,CCV has continued to aggressively sourceforeign materials in an effort to reduceproduct cost while maintaining high quality standards. Agreements reachedwith suppliers in other countries havecontributed to a significant reduction inmaterial purchase prices. Similarly, pro-

ductivity improvements in manufacturingcontributed to a higher profit percentage.Investment in more efficient equipment,as well as ongoing analysis of workflowsand setup times, enabled the Company tofurther decrease costs.

2001 outlook

In 2001, CCV is prepared for increasedspending activity in its primary pipelinemarket and significant growth in the oil-field. The higher activity levels in CCV’straditional markets will be complementedby opportunities in the rapidly growingdeepwater market, the power generationsector, and initiatives in the aftermarketbusiness. The Company will continue its foreign sourcing and productivityimprovement programs into 2001, includingan increased capital investment budgetdesigned to reduce lead times and overallmanufacturing cost.

As subsea production depths have continued toincrease, Cooper Cameron Valves has recognizedthe need for subsea ball valves suitable for therigorous demands of high external and internalpressures. To meet these challenging require-ments, CCV has introduced a line of 2″ to 16″ball valves suitable for 10,000 psi of internalpressure and for use in water depths of as much as 10,000 feet.

The prototype shown here utilizes the proven technology of the industry-leading Cameronwelded-body ball valve, and incorporates existingmetal-to-metal seat sealing technology. Thecompact, lightweight design of the Cameronwelded-body ball valve make it ideally suited for subsea applications.

Orders are currently in production for a subseaproject in the Gulf of Mexico and for topside usein South America.

CCV believes that it is well positioned to benefit from future deepwater activity worldwideand is proving to be a leader in technology development in this critical environment.

>

17

CCV’s recent product development efforts in the subsea market have furtherenhanced the company’s position as an industry technology leader.

C O O P E R E N E R G Y S E R V I C E S


Cooper Energy Services (CES) is a leading provider

of reciprocating compression equipment and

services, including aftermarket parts and services,

for the oil and gas production industry. Customers

include major oil and gas companies, large independent

oil and gas producers, gas transmission companies

and equipment leasing companies.

CES’ products include natural gas reciprocating

compressors, turbochargers, control systems,

replacement parts and services marketed under

the Ajax®, Superior®, Cooper-Bessemer®

(Reciprocating Products), CB Turbocharger®,

Penn™, Enterprise™ and Texcentric® brand names.

CES utilizes manufacturing facilities in the U.S. and

sales and service offices around the world to sell

and deliver its products and services.

19

($ millions) 2000 1999 1998

Revenues1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $224.8 $319.7 $422.5

EBITDA2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.5 9.9 24.7



Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217.4 378.7 380.8

Backlog (as of year-end). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69.2 74.3 93.41 Revised to reclassify shipping and handling costs

from revenues to cost of sales.2 Excludes nonrecurring/unusual charges. (Note: Through September 1999, CES’ results included the rotating compressor business that was sold at the end of the third quarter of 1999.)


98 99 00

$422

$320

$225

Orders($ millions)

98 99 00

$381

$379

$217


98 99 00

$93

$74

$69

This high-pressure rotary screw compressor developedby Cooper Energy Services provides variable volume ratioand capacity control for maximum efficiency in naturalgas production, transmission and fuel gas boosting.

<

EBITDA($ millions)

98 99 00

$25

$10

$20

20

Financial overview

CES’ revenues totaled $224.8 millionduring 2000, compared with $319.7 million for 1999. Included in 1999’sresults was $93 million in revenues fromthe rotating business, which was sold as ofthe end of that year’s third quarter. EBITDA(excluding nonrecurring charges) nearlydoubled during the year, increasing to$19.5 million, compared with 1999’s $9.9million. EBITDA as a percent of revenueswas 8.7 percent, compared with 3.1 per-cent during 1999.

Waller Compressor Plant completed

CES has constructed a new separablecompressor plant and research and devel-opment center in Waller, Texas, just westof Houston. Each manufacturing stationin the new plant is designed for shortcycle, just-in-time machining and assemblyto reduce inventory requirements andproduct lead times. The plant is designedto manufacture the division’s completeline of separable compressor units to servethe natural gas market. The location isconvenient to principal packaging loca-tions in and around the Houston area.Smaller, higher-speed reciprocating units,screw compressor packages and largerpipeline-oriented compressors will all besourced from this location. In addition,the site has a “closed loop”high pressure testcenter which will be used for research andengineering on new product development.

Compression products enhanced

Reciprocating compression systemsinclude Superior high-speed separablecompressors, Ajax integral engine-com-pressors and Cooper Energy Servicesrotary screw compressors powered by natural gas engines and electric motordrives. These compression systems coverrequirements in a wide range of horse-power needs for gas gathering, gas-lift, gasre-injection, transmission, storage andwithdrawal and gas processing applications.

The reciprocating group achieved significant gains in the 100 to 800 horse-power market segment with reliable, lowoperating cost Ajax integral units and thenew line of CES rotary screw packages. Inaddition, work was initiated to add a proprietary 1,150 psi high-pressure rotaryscrew system to the offering, as well ascontinued development and extension ofthe high-speed Superior reciprocatingcompressor line. In January 2001, CESclosed on the acquisition of the Griffinline of high-speed, small horsepower com-pressors to augment its product offering.The WG compressor was introduced in2000 to provide large-project compressionon applications up to 9,000 horsepower.

CES announced in January 2001 that itwas exiting the market for new Superiorbrand natural gas engines, including its2400 engine line. CES will continue tosupport the large fleet of engines and com-pressors existing in the marketplace withtechnical and engineering resources, aswell as aftermarket parts and services.

Aftermarket

CES provides aftermarket solutions tothe owners and operators of CES equip-ment, including equipment no longeroffered as new units. Customers havecontinued to outsource more of theirservice needs, resulting in growth in tradi-tional overhaul and maintenance services.

CES plans to continue to use its exten-sive aftermarket capabilities to improve theefficiency of customers’ current equip-ment through regular maintenance andrepair services.

2001 outlook

In 1999, CES began its transition from avertically integrated manufacturingorganization to one that will manufactureonly high-technology and high-value-added components. As a result, CESclosed its foundry and machining facilitiesin Grove City, Pennsylvania, began out-sourcing from selected vendors and relo-cated to other Cooper Cameron locations.Concurrent with the 1999 sale of therotating business, CES began moving itsaftermarket and compression operationsfrom the Mt. Vernon, Ohio facility, whichwas transferred to Rolls-Royce plc, toselected Cooper Cameron facilities in theHouston area. Also, in January 2001, CESannounced plans to close its Springfield,Ohio facility, in connection with the deci-sion to exit the market for new Superiorbrand natural gas engines.

With relatively strong natural gas pricesin North America, CES expects its busi-ness to improve in 2001. The divisionbegan the year with a backlog of $69.2million, which was about $5 million belowthe backlog at the beginning of 2000.Given stable market conditions, 2001should see continued improvements forCES as its products and aftermarket focusprovide better solutions for its customers.

The horizontally opposed, 3-throw crankshaft

of this new Superior reciprocating compressor

allows almost vibration-free operation without

extra weight. It can even be trailer-mounted,

if desired.

>

The reciprocating group achieved significant gains in the 100 to 800 horsepower market segmentwith reliable, low operating cost Ajax integral units and the new line of CES rotary screw packages.

C O O P E R T U R B O C O M P R E S S O R


Cooper Turbocompressor (CTC) manufactures andsupplies integrally geared centrifugal compressorsto customers around the world. Centrifugal aircompressors are sold under such trade names as Turbo Air® 2000, TAC-2000, Turbo Air® 3000, Turbo Air® 6000 and Turbo Air® 11000 and are usedin manufacturing processes by the automotive, textiles, glass, electronics and food industries.

CTC’s engineered centrifugal compressors, bearingthe trade names of TATM and MSG®, are used byprocess gas customers in the global chemical,petrochemical, power and refining industries. CTC is a leader in the air separation markets, providing the highest levels of efficiency, reliabilityand durability available.

CTC has historically been a U.S. supplier of centrifugalcompressors for global markets. The Company israpidly expanding its capabilities to become a globalsupplier of centrifugal compressors, providing equip-ment and services to customers around the world.

23

($ millions) 2000 1999 1998

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $102.4 $104.7 $134.3

EBITDA1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.2 22.8 32.7



Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108.7 95.1 107.3




98 99 00

$134

$105

$102

EBITDA($ millions)

98 99 00

$33

$23

$24

Orders($ millions)

98 99 00

$107

$95 $1

09


98 99 00

$50

$39 $4

4The TAC-2000 air-cooled, packaged centrifugal com-pressor was introduced in 2000, and has been a greatsuccess with customers in areas where water is notavailable or of poor quality. The TAC-2000 brings all thebenefits of high reliability, high efficiency and low main-tenance, plus the additional benefit of being air-cooled.The TAC is the first air-cooled, packaged centrifugal aircompressor ever. CTC plans to expand its range of air-cooled compressors to higher flows, and is now offeringa portable configuration for rental applications.

<

24

Financial overview

CTC’s revenues totaled $102.4 millionin 2000, down slightly from 1999’s $104.7million. EBITDA (excluding nonrecur-ring charges) was $24.2 million, upapproximately six percent from year-agolevels. EBITDA as a percent of revenueswas also higher at 23.6 percent, comparedto 21.8 percent in 1999.

New initiatives, expanded product offerings

Following numerous retirements at themanagement level during the past twoyears, a new senior management team,consisting of both long-term CTC employeesand key individuals hired from the indus-try, is now in place. This group’s prioritiesinclude several new programs that began toimpact CTC’s results during 2000.

A new European initiative is placinggreater emphasis on increasing marketshare in Europe. A new marketing andsales operation is now in place in Milan,Italy, and the Company’s existing packag-ing/service facility in Scotland has beenreorganized to better address Europeancustomers’ needs. This market is becominga larger component of CTC’s business.

In the Asian market, CTC appointed a new regional manager, strengthened the marketing and sales effort there, andhas implemented a new distributor train-ing program. Orders in the regionimproved during 2000, and CTC plans toestablish a packaging capability in Asiaduring 2001 to better serve customers inthe region.

North American compressor ordersincreased over the prior year, with effec-tive distributor management, new prod-uct introductions and a focused saleseffort all contributing. Distributors willcontinue to play an increasing role in thesales of standard compressors.

New products have been important toCTC’s success in responding to customers’needs. During 2000, the new TA-6000,TAC-2000, and TA-11000 were launched.CTC has redefined its Engineered

Compressor product line and is movingforward with the MSG Renaissance pro-gram. The program will result in updatingthe MSG product to make it one of themost cost-effective, high-performancecompressor products in the applicationrange that it serves. The updated productline will be designed to compress a widerange of process gases.

Aftermarket efforts reap benefits

CTC’s aftermarket business orders during 2000 were the highest in its history. The telemarketing effort, calledTeleService, has made a major contribu-tion to the results. The focus has been onregaining the CTC aftermarket businessfrom replicators by proving to customersthe optimum reliability and dependabilitythat OEM parts provide.

CTC is expanding its repair andupgrade business through the utilizationof other Cooper Cameron facilities. TheCES service center in Houston, Texas isallocating space for CTC to set up a repaircenter. The service synergy between thetwo divisions provides superior supportfor the customer, better utilization of theexisting facility and personnel and anexpansion of the service business for CTC.

New product offerings are also playinga major part in the growth of the after-market business. In 2000, Turboblend(CTC brand lubrication oil), Quad 2000 upgrades (CTC electronic control systems) and component packaging programs all added to bottom-line results.During 2001, CTC is moving forwardwith a complete program to address the aftermarket needs of competitors’centrifugal compressors.

CTC has focused on the philosophy ofexcellent customer service and immediateresponse. Continued efforts are beingmade to further improve the aftermarketapproach.

2001 outlook

Based on current backlog and anticipatedorders, CTC expects improved revenuesand profitability during 2001, as efforts toexpand and diversify the compressor andaftermarket products continue.

CTC has entered into alliance agree-ments with IHI of Japan and KK&K ofGermany. Both alliances have extended

the CTC product range and have allowedentry into new market areas. The IHIalliance has given CTC a small-flow plantair compressor for the North Americanmarket, gaining CTC an increase in productrange. The KK&K alliance has allowedCTC to participate in the process gas marketwith a partner with proven experience.

Training and key additions are strength-ening the global sales force, which is generating steady improvement in sales persalesman. Those efforts will continue in 2001.

CTC also expects to launch its e-com-merce program in 2001, providing incre-mental growth opportunities by addingnew communication ideas and methodsto the existing marketing plan.

CTC has implemented the most aggressiveproduct development program in the history of the Company. The program includes newcompressors, updating existing designs and the introduction of complementary products to the CTC centrifugal compressors. The newdevelopments incorporate the latest availabletechnology in mechanical and aerodynamic designs.

North American compressor orders increased over the prior year, with effective distributormanagement, new product introductions and a focused sales effort all contributing.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF COOPER CAMERON CORPORATION

The following discussion of the Company’s historical results of operations and financial condition should be read in conjunc-tion with the Company’s consolidated financial statements and notes thereto included elsewhere in this Annual Report. All per shareamounts included in this discussion are based on “diluted” shares outstanding.

OverviewThe Company’s operations are organized into four separate business segments — Cameron, Cooper Cameron Valves (CCV),

Cooper Energy Services (CES) and Cooper Turbocompressor (CTC). Cameron is a leading international manufacturer of oil and gaspressure control equipment, including wellheads, chokes, blowout preventers and assembled systems for oil and gas drilling, pro-duction and transmission used in onshore, offshore and subsea applications. CCV provides a full range of ball valves, gate valves,butterfly valves and accessories to customers across a wide range of the energy industry and industrial market. CES designs, man-ufactures, markets and services natural gas compression equipment, primarily for the energy industry, and CTC provides centrifu-gal air compressors and aftermarket products to manufacturing companies and chemical process industries worldwide.

The following table sets forth the consolidated percentage relationship to revenues of certain income statement items for the periods presented:

Years Ended December 31,

2000 1999 1998

Revenues 100.0% 100.0% 100.0%

Costs and expenses:Cost of sales (exclusive of depreciation and amortization) 70.3 73.0 70.8Depreciation and amortization 5.4 5.7 3.8Selling and administrative expenses 14.2 13.9 12.2Interest expense 1.3 1.9 1.7Nonrecurring/unusual charges 5.6 0.7 1.2

Total costs and expenses 96.8 95.2 89.7

Income before income taxes 3.2 4.8 10.3Income tax provision (1.2) (1.9) (3.1)

Net income 2.0% 2.9% 7.2%

2000 Compared to 1999Cooper Cameron Corporation had net income of $27.7 million, or $.50 per share, for the twelve months ended December 31, 2000

compared with $43.0 million, or $.78 per share in 1999. The results for 2000 included after-tax charges of $56.6 million ($77.4 million pre-tax), or $1.03 per share for the cost of exiting a

product line and other cost rationalization programs in all four segments. Of these charges, approximately 52% either have required,or will ultimately require, the use of cash, while the remaining 48% reflected write-offs and write-downs of intangible and tangibleassets. Further information regarding the types of costs, a breakdown by segment and a breakdown by major project is set forth inNote 2 of the Notes to Consolidated Financial Statements. At December 31, 2000, the Company had balance sheet accruals totaling$13.3 million with respect to the above charges, including remaining accruals for similar expenses incurred in 1999. The Companycurrently anticipates that all but approximately $2.8 million of these accruals will be paid out during 2001. The remaining balancerelates to such items as the carrying costs for facilities being held for sale that may be spread over several additional years.

Excluding these nonrecurring/unusual charges, the Company earned $1.53 per share in 2000 compared to $1.00 per share in 1999—an increase of 53%.

RevenuesRevenues for 2000 totaled $1.387 billion, reflecting a 6% decline from 1999’s total of $1.475 billion. Excluding 1999 revenues of

$93.1 million attributable to the CES rotating compressor business that was sold on September 30, 1999, revenues year-to-year wereessentially unchanged, with an increase in Cameron offsetting decreases in the other three segments. Revenues for 1999 and prioryears have been restated to exclude certain freight costs that are now required to be treated as an element of cost of sales rather thana reduction of revenues.

Revenues for Cameron totaled $838.3 million, an increase of 3% from 1999 revenues of $817.1 million. Revenue increases in bothsubsea and aftermarket products more than offset a fairly significant decline in drilling and a smaller decline in surface products. Atthe end of 1999, the Company had a fairly significant backlog of larger drilling projects, including control systems that were deliv-ered during 2000 but not replaced with additional large project orders at this stage of the recovery in the markets served by Cameron.Subsea products benefited from deliveries related to a large project offshore in the Philippines, as well as several projects in Equatorial

25

Guinea. As with drilling, however, 2000 did not produce additional large subsea project orders. As a result, while the overall sub-sea backlog is somewhat higher at the end of 2000 than at the beginning, the proportion of larger versus smaller projects has declined.The small decline in year-over-year revenues from surface products was more a matter of individual markets than an overall trend,with improvements in the Western Hemisphere offset by declines in Europe and, to a lesser degree, Asia Pacific. Overall, the after-market products fared best with not only a 17% improvement in revenues but also a 67% improvement in backlog. This resultreflected improvements in nearly all geographic areas as customers were repairing and upgrading oilfield equipment in responseto higher oil and gas prices.

CCV’s revenues of $221.1 million declined by 5% from 1999’s $233.6 million. Increases in distributor products and aftermar-ket revenues were more than offset by declines in pipeline valve sales and in Orbit valves, which are sold primarily in industrialapplications. Although order activity improved in 2000 compared to 1999, the overall decline in revenues was primarily the resultof a higher backlog level, particularly in pipeline valves, at the beginning of 1999 compared to the beginning of 2000. Backlog atthe beginning of 2001 is over 30% higher than at the beginning of 2000, but still over 20% below the beginning of 1999.

Revenues for CES, excluding the revenues related to the rotating compressor business as noted above, declined by less than1%. Excluding revenues related to the new unit Superior engine business (in the process of being discontinued), which declinedby $6 million year over year, CES’s revenues actually increased by nearly 2%. Declines in the Superior separable compressor line,which were negatively affected by the problems in the Superior engine business, as well as start-up issues at a new manufactur-ing facility near Houston, Texas where these compressors will now be manufactured, were more than offset by a 12% improvementin CES aftermarket revenues. Following the discontinuance of the new unit engine business, nearly 70% of CES revenues in futureperiods are currently expected to come from aftermarket parts and service.

CTC revenues of $102.4 million were down slightly (2%) from 1999’s total of $104.7 million. This decline was entirely attrib-utable to a nearly 35% decline in revenues from CTC’s highly engineered process air machines that are utilized by air separationcompanies throughout the world. Revenue growth in plant air machines, as well as improvements in both aftermarket parts andrepairs, were nearly sufficient to offset this decline.

Cost and ExpensesWhile revenues declined by $88.4 million as discussed above, cost of sales (exclusive of depreciation and amortization)

decreased by $101.5 million producing $13.1 million of additional margin (a 2.7 percentage point improvement in the gross mar-gin percentage (defined as revenues less cost of sales as a percentage of revenues)). These results are discussed below in more detailfor each segment.

Cameron’s gross margin percentage remained essentially unchanged at approximately 29%. The savings generated by restruc-turing programs were offset by start-up problems with a new drilling controls system, as well as pricing pressure in both the AsiaPacific and Eastern Hemisphere regions, resulting in net additional margin of $3.9 million.

CCV’s gross margin percentage improved by nearly 4 percentage points to 32.2% as benefits from earlier restructuring effortscontinued, along with a revenue shift from pipeline to distributor products (which normally carry higher margins) and a growthin aftermarket revenues more than offsetting a decline in Orbit, which has the highest overall margin percentage. This improve-ment resulted in $5.1 million of additional margin.

CES’s gross margin percentage increased from 18.4% to 27.0% almost entirely as a result of the disposition of the rotating com-pressor business. Particularly in 1999, this business had a very low gross margin percentage and, after period costs, including anallocation of general overhead expenses, actually operated at a loss. CES’s margin improvement was $1.9 million. The decisionto exit the Superior new unit engine business should provide further improvements in 2001 and beyond, since this product linewas generating virtually no gross margin and operating at a loss after period costs are considered.

CTC’s gross margin percentage improved by slightly more than three percentage points to 35.8%. This result reflects productivityimprovements as well as a focus on controlling the fixed-cost components of cost of sales. Machine tool upgrades over the last several years, as well as a single manufacturing plant environment that permits closer management control, facilitated the improve-ment. CTC’s margin improvement was $2.5 million.

Depreciation and amortization expense declined from $83.7 million in 1999 to $75.3 million in 2000. Virtually all of this declineoccurred at CES, where fixed assets sold in connection with the sale of the rotating compressor business, as well as those elimi-nated in various restructurings, more than offset any incremental increase resulting from new capital expenditures. In the othersegments, year-to-year expense was essentially flat as depreciation on new additions offset the effect of assets that became fullydepreciated.

Selling and administrative expense declined by $8.3 million from $205.7 million in 1999 to $197.4 million in 2000. As a per-centage of revenues, this expense remained largely unchanged at 14%. From a segment perspective, CES had the largest declineat $7.6 million, or 15.6%, for the same reasons discussed above in connection with depreciation and amortization expense. Cameronalso had lower costs ($5.6 million or 5.5%) reflecting the benefits of restructuring efforts and additional pension income from higherreturns on pension assets, while CCV, CTC and Corporate all had small increases primarily related to sales and marketing initiatives.

Reflecting the various factors discussed above, operating income (defined as earnings before the 1999 gain on sale, nonrecur-ring/unusual charges, corporate expenses, interest and taxes) totaled $155.0 million, or an improvement of $32.0 million over 1999’s$123.0 million. Cameron increased from $94.9 million to $103.0 million, CCV increased from $20.4 million to $25.7 million, CESincreased from a loss of $(8.5) million to income of $8.8 million and CTC increased from $16.2 million to $17.5 million.

Interest expense declined from $27.8 million in 1999 to $18.0 million in 2000. This decline was almost entirely attributable to approx-imately $200 million of cash received on September 30, 1999 in connection with the sale of the CES rotating compressor business.

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The tax rate for 2000 was 36.8%, reflecting the combination of a full-year rate on operational earnings, including nonrecur-ring/unusual charges, of 30.5% and the absence of a tax deduction on $9.1 million of translation component write-offs (includedin nonrecurring) that are not deductible for tax purposes. The 30.5% compares with 32.9% in 1999 and is lower primarily becausethe proportion of foreign income in certain lower tax rate locations such as Singapore and Ireland was higher in 2000 than in 1999.

1999 Compared to 1998Cooper Cameron Corporation had net income of $43.0 million, or $.78 per share, for the twelve months ended December 31,

1999. This compares to $136.2 million, or $2.48 per share, for the same period in 1998.Included in the 1999 results were after-tax charges of $37.5 million ($55.9 million pre-tax), or $.69 per share, for cost rationalization

in all four segments. These charges included non-cash asset write-downs, severance costs for staff reductions and $9.2 million in pre-tax charges related to various cost reduction programs initiated during 1998.

Providing a partial offset to nonrecurring expense was a preliminary after-tax gain of $25.8 million ($45.3 million pre-tax), or $.47 per share, on the sale of the CES rotating compressor business to Rolls-Royce plc for approximately $200 million in cash.

Included in the 1998 results were $15.5 million, or $.28 per share, in after-tax nonrecurring/unusual charges ($22.0 million pre-tax), primarily for severance costs in all four segments. See Note 2 of the Notes to Consolidated Financial Statements for further information regarding the nonrecurring/unusual charges recorded in both 1999 and 1998.

Excluding these nonrecurring/unusual charges, the Company earned $1.00 per share in 1999 compared to $2.76 per share in 1998.

RevenuesRevenues for 1999 totaled $1.475 billion, a decrease of 22% from the $1.893 billion in 1998, with declines in all four segments.

Revenues for Cameron totaled $817.1 million, a decrease of 20% from 1998 revenues of $1.025 billion. Revenues decreased in sur-face and subsea products, while drilling product revenues increased. Drilling product revenues were heavily influenced by longlead-time major project orders booked during 1998, while subsea products suffered from the lack of major projects in the Gulf ofMexico and North Sea. Surface products, which have a shorter delivery cycle and respond more quickly to changes in orders, reflectedthe low levels of activity in this market during 1999. Revenues for Cameron Controls, Cameron Willis, and aftermarket areincluded in drilling, surface, and subsea product categories. On a geographical basis, revenues decreased in all regions. The WesternHemisphere declined primarily due to weak surface product activity related to the generally sluggish market conditions in the U.S.,Canada, and Latin America. The Eastern Hemisphere decreased primarily due to the weak activity in the North Sea, while AsiaPacific declined due to delayed gas development projects throughout the region.

CCV’s revenues of $233.6 million declined by 25% from the $311.8 million in 1998. The weakness was across all productsand markets, including oilfield distributor products, where customers worked off excess inventories during 1999, and in pipelinevalves, where major projects were delayed. Additionally, Orbit Valve International, Inc. (Orbit Valve) products declined, due toa lack of major upgrade or new chemical plant projects, in spite of an extra quarter of revenues in 1999 (the business was acquiredApril 2, 1998).

Revenues for CES of $319.7 million declined by 24% from the $422.5 million in 1998. The market served by this segment remainedvery competitive during 1999, with industry-wide overcapacity. Virtually all of the revenue decline was in the rotating compres-sor business, which was sold to Rolls-Royce plc on September 30, 1999. Through the sale date, this portion of the business had revenues of $93.1 million, compared to $188.1 million for all of 1998. The ongoing reciprocating products business declinedby 3% from 1998 to 1999 due to generally stagnant market conditions.

CTC had revenues of $104.7 million, or a decrease of 22%, from $134.3 million in 1998, with declines across all lines of the busi-ness. The most significant decline was in process air machines, where large air separation customers delayed placing new ordersduring 1999. The overall low level of products sold directly to Southeast Asian markets was the primary factor in the plant air machinemarket during the year. This continuing weakness in the Asian markets also caused industrial development projects in other partsof the world to be pushed out and, when undertaken, to be more price competitive.

Cost and ExpensesThe $418.3 million revenue decrease discussed above resulted in a $264.4 million decrease in cost of sales (exclusive of depre-

ciation and amortization) and a resulting gross margin shortfall of $153.9 million. Because short-term cost control measures werenot able to keep pace with the revenue decline, as well as changes in sales mix, the gross margin percentage (defined as revenuesless cost of sales as a percentage of revenues) declined by 2.2 percentage points. This result is discussed below in more detail foreach segment.

Cameron’s gross margin percentage was 29.4% in 1999, compared to 32.6% in 1998. The decline resulted from an increase inrelatively lower-margin drilling product revenues combined with a decrease in higher-margin surface and subsea products.Additionally, pricing pressure, which began to increase in late 1998, continued during 1999, although the effect on 1999 results wassomewhat mitigated by shipments from backlog at favorable pricing levels. Providing a partial offset were the benefits of variousongoing cost reductions, including foreign sourcing of material, staffing reductions, and capital expenditures for new higher-efficiency machine tools.

CCV’s gross margin percentage decreased from 31.2% in 1998 to 28.3% in 1999. The decline was caused by increased pricingpressure, as competitors fought to retain share in the severely depressed markets, and manufacturing period cost reductions whichwere unable to keep pace, in the near term, with the rapid decline in revenues.

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The gross margin percentage for CES improved from 18.2% in 1998 to 18.4% in 1999. This slight improvement was the result of the decrease in the lower-margin rotating compressor business revenues, partially offset by pricing pressure throughoutthe business and cost reductions that could not keep pace with the revenue decline.

CTC’s gross margin percentage declined from 33.1% in 1998 to 32.6% in 1999. The decline resulted from pricing pressure inall product lines, but particularly in process air machines.

Depreciation and amortization expense increased by $11.2 million, from $72.5 million in 1998 to $83.7 million in 1999. Thisincrease was due mainly to capital spending during 1998 and 1999, primarily in Cameron.

Selling and administrative expenses decreased by $24.0 million, or 10%, from $229.7 million in 1998 to $205.7 million in 1999.Cameron decreased by $18.3 million due to cost reductions in response to revenue declines. CCV declined by $3.7 million as theadditional quarter of Orbit Valve was more than offset by cost reductions in the remainder of the business. CES decreased by $3.6million due to the sale of the rotating compressor business on September 30, 1999 and cost reductions in the reciprocating busi-ness. Despite the Company’s efforts to reduce costs in this area, selling and administrative expense as a percentage of revenueincreased from 12.2% in 1998 to 13.9% in 1999.

Reflecting the various factors discussed above, operating income (defined as earnings before the gain on sale, nonrecur-ring/unusual charges, corporate expenses, interest and taxes) totaled $123.0 million, a decrease of $138.8 million from 1998.Cameron decreased from $180.2 million to $94.9 million, CCV declined from $48.4 million to $20.4 million, CES decreased from$6.8 million to a loss of $(8.5) million, and CTC declined from $26.4 million to $16.2 million.

Interest expense was $27.8 million in 1999, a decrease of $4.9 million from 1998. This decline was due to a lower average debtlevel, primarily from working capital reductions and the proceeds from the sale of the rotating compressor business.

The tax rate for 1999 was 39.4%, reflecting the combination of a 43.0% tax rate on the gain on sale, combined with a full yearrate on operational earnings, including nonrecurring expenses, of 32.9%. The 32.9% rate compares to a 1998 rate of 30.4%, and ishigher primarily due to a change in the mix of domestic and foreign earnings.

Outlook for 2001The Company currently expects its 2001 earnings per share, excluding charges, to total approximately $1.90 to $2.00, and first

quarter earnings to be essentially the same as the first quarter of 2000, or approximately $.30 per share. Earnings in the remainingquarters of 2001 are expected to show sequential increases, with 60 to 70 percent of the year’s earnings generated in the secondhalf. A major factor contributing to this expectation is the timing of awards for large-scale subsea projects. During 2000, awardscontinued to be delayed such that the estimated 2001 results do not include any earnings contribution from the large-scale subseaproject bids that Cameron currently has outstanding. Any projects ultimately awarded during 2001 are unlikely to generate mean-ingful revenues and earnings until 2002, given the time from order receipt to product delivery typically involved in such projects.In connection with the decision to exit the Superior new unit engine business, the Company currently expects that it may incur $20to $25 million of additional cash expense, including operating costs, during the shutdown that is expected to be largely completedduring the first half of 2001. These charges are excluded from the earnings estimates set forth above.

Pricing and VolumeThe Company believes that the year-to-year revenue changes reflect, on an overall basis, a 2000 price decrease in CCV, a slight

decrease in Cameron and flat pricing for the other two segments; 1999 price decreases in all four segments due to weak marketconditions and pricing pressure; and 1998 price increases in Cameron and CCV, while CES and CTC had price decreases.Correspondingly, 2000 sales volumes were up in Cameron and down for the remaining three segments; 1999 sales volumes weredown in all four segments; and 1998 sales volumes were up in Cameron and CCV but down in CES and CTC. Excluding the effectof the Orbit Valve acquisition on sales volumes, CCV would have had a decline in 1998. Cameron initiated some price increasesin the latter part of 2000 that may contribute to an increase in revenues in 2001.

Liquidity and Capital ResourcesDuring 2000, total indebtedness decreased by approximately $18 million or 8.6% to $192.3 million—the lowest total indebted-

ness amount in the Company’s 5 1/2 -year history. This decrease resulted almost entirely from operating cash flows as the signifi-cant cash inflow ($62 million) resulting from employee purchases of stock through option exercises and other miscellaneous cashflows offset the $67 million utilized for capital expenditures and an $8 million increase in the Company’s available cash balance. The Company’s debt-to-capitalization ratio at year-end 2000 was 18.6%, compared to 22.8% at year end 1999, also a record low.

During 1999, total indebtedness decreased by nearly 50% to $210.3 million at year-end compared to $414.0 million at December31, 1998. This decrease was largely attributable to the $203.2 million of cash received at the end of the third quarter in connectionwith the sale of the rotating compressor business.

During 1998, total indebtedness increased by $37.0 million from 1997. The combination of strong earnings and improved work-ing capital management during 1998 largely offset over $207 million of cash utilized for capital expenditures and acquisitions, inaddition to over $20 million of debt assumed in the Orbit acquisition, as well as $36 million of cash used to repurchase Companystock early in the year.

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In addition to uncommitted amounts available under various other borrowing arrangements, the Company had $304.5 mil-lion of committed borrowing capacity available at December 31, 2000. There are also several other significant items that should beconsidered in evaluating the Company’s overall liquidity. At December 31, 2000, the Company’s defined benefit pension planswere overfunded by $82.2 million ($85.8 million at December 31, 1999). In addition to providing pension income rather than pen-sion expense over the last three years, those overfunded plans have aided the Company’s liquidity by minimizing the necessity tomake pension contributions. In addition, at December 31, 2000, the Company had $85.6 million of U.S. federal income tax loss carry-forwards that were primarily attributable to a deduction which the Company received when employees were required to pay taxon the gain from stock option exercises. The magnitude of this asset is such that the Company does not currently anticipate pay-ing essentially any U.S. federal income tax during 2001 and through most of 2002.

In connection with a “shelf” registration statement filed during May 1998, the Company entered into treasury locks, or for-ward rate agreements, which locked in a weighted average interest rate of 5.83% on $175 million of a prospective long-term debtissuance. During March 1999, the Company entered into interest rate swaps with various financial institutions, effectively con-verting $175 million of outstanding floating rate debt to fixed rate debt at a weighted average interest rate of 6.46%. This transac-tion replaced the existing treasury locks, or forward rate agreements. The Company paid $8.2 million to the counterparties to thetreasury locks in connection with the termination of these agreements. In December 1999, the Company terminated the interestrate swaps, receiving $11.2 million from the counterparties to these agreements. Of the net $3 million gain, $0.9 million was rec-ognized in the fourth quarter of 1999 and the remainder is being amortized to interest expense over the remaining 10-year life ofthe interest rate swaps. During January 2001, the Company entered into interest rate swaps which effectively converted $155 mil-lion of outstanding floating rate debt to fixed rate debt at a weighted average interest rate of 5.24%. The majority of these swapsextend through March 2002.

The Company’s liquidity can be susceptible to fairly large swings in relatively short periods of time. This is largely becauseof the cyclical nature of the industry in which the Company competes and the long time period from when the Company first receivesa large equipment order until the product can be manufactured, delivered, and the receivable collected.

Working CapitalOperating working capital is defined as receivables and inventories less accounts payable and accrued liabilities, excluding

the effect of foreign currency translation, acquisitions and divestitures.During 2000, operating working capital increased by $44.9 million, with a decrease in inventories being more than offset by

an increase in accounts receivable and a decrease in accounts payable and accrued liabilities. The $17.0 million inventory decreaseand the $11.6 million receivable increase reflect normal operating activities as the Company’s business grew modestly during 2000.The $50.4 million decrease in accounts payable and accrued liabilities occurred primarily in Cameron and is primarily attribut-able to a decrease in the amount of customer advances (classified as an accrued liability) as most of the larger drilling projectshave been completed and not replaced with either new drilling or subsea projects.

During 1999, operating working capital decreased $91.8 million. Receivables decreased by $40 million, primarily in Cameronand CCV, due to a combined 22% decline in revenues. Inventories decreased by $72 million, with declines in Cameron, CCV, andCTC, and an increase in CES. The declines were related to the weak markets and the resulting decrease in production require-ments, as well as a continuing focus on inventory reduction programs. The increase in CES resulted from a higher year-end 1999backlog level in reciprocating products. Accounts payable and accrued liabilities decreased $21 million, reflecting the lower busi-ness levels and a decline in cash advances and progress payments received from customers as major project orders in Cameron’sbacklog declined.

During 1998, operating working capital decreased $13.9 million. This result was comprised of a $58 million increase during thefirst nine months of 1998 followed by a fourth quarter decline of $71.9 million. Of the fourth quarter decline, approximately $44 mil-lion came from receivables and $43 million from inventories, partially offset by lower accounts payable and accrued liabilities of approx-imately $15 million. The receivable and inventory declines reflected some initial slowing of activity and, for receivables, unusuallystrong fourth quarter collections. On a year-to-year basis, receivables declined by nearly $80 million, including a nearly $24 milliondecline in receivables recognized by CES under the percentage of completion method, which reflected the completion of large gasturbine and compressor projects. Despite the fourth quarter decrease, inventories increased on a year-to-year basis by $23 million,with small declines in Cameron and CCV (excluding Orbit) offset by an increase at CES and CTC. While the declines reflected nor-mal operating activity, the increase at CES resulted from a decision to maintain production levels despite delays in the receipt of anticipated orders. This decision was, to a large degree, validated by the receipt in late 1998 and early in 1999 of nearly $57 millionof gas turbine and compressor project business. The $42 million year-to-year decrease in accounts payable and accrued liabilitiesreflected a decline in inventory purchases as well as the lower overall year-end 1998 business levels, partially offset by an increasein cash advances and progress payments received from customers on major project orders in Cameron’s backlog.

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Cash FlowsDuring 2000, cash flows from operating activities totaled $20.2 million, a decrease of $119.7 million or 86% from the prior year

level. This result was largely attributable to the combined effect of a $44.9 million increase in working capital in 2000 combinedwith the prior year’s $91.8 million decrease, partially offset by a number of other small year-to-year changes. The cash flow fromoperating activities, combined with $79.3 million from stock plan activity, positive net cash flow from divestitures less acquisitionsand other items, was sufficient to cover $66.6 million of capital expenditures, an $8.4 million increase in available cash and a reduc-tion in total indebtedness of $18 million.

During 1999, cash flows from operating activities totaled $139.9 million, a decline of $95.7 million or 41% from the prior yearlevel. This decline was primarily attributable to a $93.2 million decrease in net income for the year. The cash flow from operations,along with the proceeds from the sale of the rotating compressor business totaling $203.2 million and $9.3 million from the sale ofplant and equipment, was utilized primarily to pay down outstanding debt of approximately $196.2 million, fund capital expen-ditures totaling $64.9 million and allow for the mid-December acquisition of $92.3 million (approximately 3.5 million shares) ofcommon stock under forward purchase agreements with two financial institutions. Other uses of cash included the acquisitionduring the fourth quarter of the remaining interest in a joint venture located in Venezuela in which the Company previously helda 49% equity interest.

During 1998, cash flows from operating activities totaled $235.6 million, more than twice the level of the previous year. Thiscash flow, along with net proceeds from sales of plant and equipment of $7.4 million, stock option exercises and other activities of$3.4 million and additional borrowings of $15.7 million, was utilized to fund capital spending of $115.5 million, the cash cost ofacquisitions totaling $99.4 million and repurchases of Company stock totaling $36.1 million. The Company’s available cash balance also increased by nearly $10 million. The $119.9 million increase in cash flow from operating activities compared to theprior year was virtually all due to working capital changes, predominantly at Cameron and CES. The decline in working capitalrequirements in 1998 is discussed in the Working Capital section immediately above.

With regard to capital spending, nearly 60% of total expenditures in 2000 and 1999 and over two-thirds in 1998 were attrib-utable to Cameron, primarily for projects to increase factory throughput and improve delivery times.

Capital Expenditures and CommitmentsCapital projects to reduce product costs, improve product quality, increase manufacturing efficiency and operating flexibility,

or enhance production capacity resulted in expenditures of $66.6 million in 2000 compared to $64.9 million in 1999 and $115.5 million in 1998.

Planned expenditures for new capital projects during 2001 amount to approximately $108.6 million. These internal commit-ments include approximately $38.6 million for a new Cameron headquarters building, $31.5 million for machinery and equipmentmodernization and enhancement, $13.5 million for capacity enhancement, $9.3 million for various computer hardware and soft-ware projects, and $15.7 million for other items. Expenditures in 2000 and planned spending for 2001 are focused on generatingnear-term returns by reducing costs, increasing factory throughput, and improving delivery times for customers.

Evaluation of Goodwill RealizationOf the Company’s $250.4 million of net goodwill at December 31, 2000, the majority relates to acquisitions made by its former

parent, Cooper Industries, Inc., prior to the mid-1995 split-off of Cooper Cameron as a separate public company. These acquisitionsincluded various businesses which were incorporated into the CES organization, the Joy Industrial Compressor Group, which becamethe predominant part of the CTC division and, most significantly, the 1989 acquisition of Cameron Iron Works (now the Camerondivision). At the time of the Company’s split-off from Cooper Industries, the goodwill related to Cameron was written down by$441 million. Subsequent to the split-off, the Company’s primary acquisitions have included the 1996 purchase of Ingram CactusCompany (incorporated into Cameron’s operations) and the CCV purchase of Orbit Valve International, Inc. in 1998. Cameron, CCVand CES have also made various smaller product line acquisitions over the last five and one-half years which have added to theCompany’s goodwill. In most cases, the Company has determined 40 years to be an appropriate period for amortizing goodwillfrom the respective acquisition dates due to the long-lived nature of the businesses acquired and the lack of rapid technological changeor obsolescence associated with these operations. As discussed above, during 2000, operating income (which excludes nonrecur-ring/unusual charges and certain other items) increased by $32 million to $155 million and is currently expected to increase furtherduring 2001. As a result, at this time, the Company has no reason to believe that future cash flows from these operations will not besufficient to fully realize the remaining carrying value of its goodwill.

Environmental RemediationThe cost of environmental remediation and compliance has not been an item of material expense for the Company during any

of the periods presented. Cooper Cameron has been identified as a potentially responsible party with respect to five sites desig-nated for cleanup under the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”) or similar statelaws. The Company’s involvement at four of the sites is at a de minimis level. The fifth site is Osborne, Pennsylvania (a landfill

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into which the CES business operating in Grove City, Pennsylvania had disposed of waste), where remediation is complete andremaining costs (less than $1 million) relate to ongoing ground water treatment and monitoring. The Company believes, based onits review and other factors, that the estimated costs related to these sites will not have a material adverse effect on the Company’sresults of operations, financial condition or liquidity. However, no assurance can be given that the actual cost will not exceed theestimates of the cleanup costs, once determined.

Market Risk InformationA large portion of the Company’s operations consist of manufacturing and sales activities in foreign jurisdictions, principally

in Europe, Canada, Latin America and the Pacific Rim. As a result, the Company’s financial performance may be affected by changesin foreign currency exchange rates or weak economic conditions in these markets. Overall, the Company generally is a net receiverof Pounds Sterling and Canadian dollars and, therefore, benefits from a weaker U.S. dollar with respect to these currencies.Typically, the Company is a net payer of euros (including related legacy currencies) and Norwegian krone as well as other currenciessuch as the Singapore dollar and the Brazilian real. A weaker U.S. dollar with respect to these currencies may have an adverse effecton the Company. For each of the last three years, the Company’s gain or loss from foreign currency-denominated transactions hasnot been material.

In order to mitigate the effect of exchange rate changes, the Company will often structure sales contracts to provide for collections from customers in U.S. dollars. In certain specific instances, the Company may enter into forward foreign currencyexchange contracts to hedge specific, large, non-U.S. dollar anticipated receipts or large anticipated receipts in currencies for whichthe Company does not traditionally have fully offsetting local currency expenditures. During 2000, the Company was a party mainlyto forward foreign currency exchange contracts related to certain large European, including the U.K., currency receipts.

The Company’s interest expense is most sensitive to changes in the general level of U.S. interest rates, particularly in regardto debt instruments with rates pegged to the London Interbank Offered Rate (LIBOR). As a result, the Company was a party tointerest rate swaps, which effectively fixed the LIBOR component of its borrowing cost on a total of $250 million, through mid-December of 1999, and $75 million, through mid-year 2000, of outstanding indebtedness.

The Company had no financial instruments with exposure to market rate changes at December 31, 2000 or 1999. The follow-ing is a summary of the Company’s outstanding financial instruments with exposure to changes in interest rates and exchange rates:

Interest ExchangeRate Rate

(dollars in millions) Sensitive Sensitive

As of December 31, 2000:

U.S. dollar variable rate debt, due 2002 $ 165.0Average interest rate 6.8%Fair value difference $ —

U.S. dollar fixed rate debt 1 $ 10.5Average interest rate 6.1%Fair value difference $ —

Other (primarily Canadian dollar and British pound)variable rate debt, due 2002 $ 9.5 $ 9.5

Average interest rate 8.6% 8.6%Fair value difference $ — $ —

Forward contracts to buy/sell foreign currencies (due 2001):Buy Norwegian krone $ 2.0

Average U.S. dollar to Norwegian krone contract rate 8.8612/31/00 U.S. dollar to Norwegian krone exchange rate 8.80Fair value difference $ —

Buy British pounds $ 14.8Average British pound to U.S. dollar contract rate 1.4812/31/00 British pound to U.S. dollar exchange rate 1.49Fair value difference $ 0.2

Buy other currencies (primarily Australian dollars) $ 2.5Fair value difference $ —

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Interest ExchangeRate Rate

(dollars in millions) Sensitive Sensitive

As of December 31, 1999:

U.S. dollar variable rate debt, due 2002 $ 167.3Average interest rate 6.7%Fair value difference $ —

U.S. dollar fixed rate debt 2 $ 20.5Average interest rate 6.1%Fair value difference $ —

Other (primarily Canadian dollar) variable rate debt, due 2002 $ 12.6 $ 12.6Average interest rate 6.9% 6.9%Fair value difference $ — $ —

Interest rate swaps — pay fixed/receive variablenotional amount, due 2000 $ 75.0

Average fixed pay rate 5.77%Average receive rate (LIBOR) 6.00%Fair value difference $ 0.2

Forward contracts to buy/sell foreign currencies (due 2000):Buy euros, net $ 2.8

Average euro to U.S. dollar contract rate 1.0112/31/99 euro to U.S. dollar exchange rate 1.01Fair value difference $ —

Buy British pounds $ 51.9Average British pound to U.S. dollar contract rate 1.6112/31/99 British pound to U.S. dollar exchange rate 1.62Fair value difference $ 0.3

Buy other currencies (primarily Norwegian krone) $ 10.4Fair value difference $ —

1 Includes $350,000 at 6.0% due 2001. The remaining balance is due in 2002.2 Includes $10.0 million at 6.0% due 2000. The remaining balance is due in 2002.

OtherIn addition to the historical data contained herein, this Annual Report, including the information set forth above in the

Company’s Management’s Discussion and Analysis and elsewhere in this report, includes forward-looking statements regardingthe future revenues and earnings of the Company, future savings from nonrecurring actions taken to date, as well as expectationsregarding backlog, orders, cash flows and future levels of capital spending made in reliance upon the safe harbor provisions of thePrivate Securities Litigation Reform Act of 1995. The Company’s actual results may differ materially from those described in for-ward-looking statements. Such statements are based on current expectations of the Company’s performance and are subject to avariety of factors, not under the control of the Company, which can affect the Company’s results of operations, liquidity or finan-cial condition. Such factors may include overall demand for, and pricing of, the Company’s products; the size and timing of orders;changes in the price of (and demand for) oil and gas in both domestic and international markets; political and social issues affect-ing the countries in which the Company does business; fluctuations in currency markets worldwide; and variations in global eco-nomic activity. In particular, current and projected oil and gas prices directly affect customers’ spending levels and their relatedpurchases of the Company’s products and services. Additionally, changes in oil and gas price expectations may impact theCompany’s financial results due to decisions it may make regarding changes in cost structure, staffing or spending levels.

Because the information herein is based solely on data currently available, it is subject to change as a result of changes in conditions over which the Company has no control or influence, and should not therefore be viewed as assurance regarding theCompany’s future performance. Additionally, the Company is not obligated to make public indication of such changes unlessrequired under applicable disclosure rules and regulations.

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REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and StockholdersCooper Cameron Corporation

We have audited the accompanying consolidated balance sheets of Cooper Cameron Corporation as of December 31, 2000 and 1999 and the related statements of consolidated results of operations, consolidated changes in stockholders’ equity and consolidated cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the respon-sibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the finan-cial statements. An audit also includes assessing the accounting principles used and significant estimates made by management,as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for ouropinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidatedfinancial position of Cooper Cameron Corporation at December 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States.

Houston, TexasJanuary 30, 2001

CONSOLIDATED RESULTS OF OPERATIONS(dollars in thousands, except per share data)


2000 1999 1998

Revenues 1 $ 1,386,709 $ 1,475,061 $ 1,893,311

Costs and expenses:Cost of sales (exclusive of depreciation

and amortization) 1 974,797 1,076,276 1,340,722Depreciation and amortization 75,321 83,716 72,474Selling and administrative expenses 197,381 205,734 229,710Interest expense 18,038 27,834 32,721Nonrecurring/unusual charges 77,399 10,585 21,956

1,342,936 1,404,145 1,697,583

Income before income taxes 43,773 70,916 195,728Income tax provision (16,113) (27,914) (59,572)

Net income $ 27,660 $ 43,002 $ 136,156

Earnings per share:Basic $ .52 $ .81 $ 2.58Diluted $ .50 $ .78 $ 2.48

1 Revised to include shipping and handling costs as an item in cost of sales rather than a reduction in revenues.

The Notes to Consolidated Financial Statements are an integral part of these statements.

34

35

CONSOLIDATED BALANCE SHEETS(dollars in thousands, except shares and per share data)

December 31,

2000 1999

AssetsCash and cash equivalents $ 16,566 $ 8,215Receivables, net 268,768 271,511Inventories, net 372,740 400,038Other 29,912 24,809

Total current assets 687,986 704,573

Plant and equipment, at cost less accumulateddepreciation 403,220 419,613

Intangibles, less accumulated amortization 261,600 280,954Other assets 141,067 65,579

Total assets $ 1,493,873 $ 1,470,719

Liabilities and stockholders’ equityCurrent maturities of long-term debt $ 4,212 $ 14,472Accounts payable and accrued liabilities 325,004 394,971Accrued income taxes 16,815 12,383

Total current liabilities 346,031 421,826

Long-term debt 188,060 195,860Postretirement benefits other than pensions 48,573 60,823Deferred income taxes 38,453 38,931Other long-term liabilities 30,477 39,201

Total liabilities 651,594 756,641

Stockholders’ equity:Common stock, par value $.01 per share, 150,000,000

shares authorized, 54,011,929 shares issued (54,001,507 at December 31, 1999) 540 540

Preferred stock, par value $.01 per share, 10,000,000 shares authorized, no shares issued or outstanding — —

Capital in excess of par value 929,511 899,978Accumulated other elements of comprehensive income (37,105) (12,039)Retained deficit (50,667) (78,327)Less: Treasury stock - 3,433,548 shares at cost at December 31, 1999 — (96,074)

Total stockholders’ equity 842,279 714,078

Total liabilities and stockholders’ equity $ 1,493,873 $ 1,470,719


CONSOLIDATED CASH FLOWS(dollars in thousands)


2000 1999 1998

Cash flows from operating activities:Net income $ 27,660 $ 43,002 $ 136,156Adjustments to reconcile net income to net cash

provided by operating activities:Depreciation 59,797 64,395 54,735Amortization 15,524 19,321 17,739Deferred income taxes and other 739 (10,688) 6,037

Changes in assets and liabilities, net of translation and effectsof acquisitions, dispositions and non-cash items:

Receivables (11,562) 40,319 79,574Inventories 17,009 72,402 (23,517)Accounts payable and accrued liabilities (50,394) (20,872) (42,147)Other assets and liabilities, net (38,587) (42,169) 7,031

Change in assets and liabilities (83,534) 49,680 20,941

Exclude nonoperating gain from sale of rotatingbusiness, net of tax — (25,788) —

Net cash provided by operating activities 20,186 139,922 235,608

Cash flows from investing activities:Capital expenditures (66,599) (64,909) (115,469)Proceeds from sale of rotating business — 203,160 —Other dispositions (acquisitions), net 8,171 (7,540) (99,353)Other 15,703 9,256 7,392

Net cash provided by (used for) investing activities (42,725) 139,967 (207,430)

Cash flows from financing activities:Loan borrowings (repayments), net (17,830) (196,232) 15,743Activity under stock option plans and other 55,446 (4,802) 3,432Purchase of treasury stock — (92,332) (36,050)

Net cash provided by (used for) financing activities 37,616 (293,366) (16,875)

Effect of translation on cash (6,726) 396 (1,606)

Increase (decrease) in cash and cash equivalents 8,351 (13,081) 9,697Cash and cash equivalents, beginning of year 8,215 21,296 11,599

Cash and cash equivalents, end of year $ 16,566 $ 8,215 $ 21,296


36

37

CONSOLIDATED CHANGES IN STOCKHOLDERS’ EQUITY(dollars in thousands)

Accumulatedother

Capital in elements ofCommon excess of Comprehensive comprehensive Retained Treasury

stock par value income income deficit stock

Balance – December 31, 1997 $532 $922,975 $ 7,799 $(257,485) $(31,770)

Net income $ 136,156 136,156Other comprehensive income:

Foreign currency translation 9,736Minimum pension liability, net of

$49 in taxes (80)Total other comprehensive income 9,656 9,656Comprehensive income $ 145,812

Purchase of treasury stock (36,050)Common stock issued under stock option

and other employee benefit plans 1 (53,305) 67,820Tax benefit of employee stock benefit

plan transactions 15,223Cost of forward stock purchase agreements (1,267)

Balance – December 31, 1998 533 883,626 17,455 (121,329) —

Net income $ 43,002 43,002Other comprehensive income (loss):

Foreign currency translation (29,479)Minimum pension liability, net of

$63 in taxes (15)Total other comprehensive income (loss) (29,494) (29,494)Comprehensive income $ 13,508

Purchase of treasury stock 1,267 (98,378)Common stock issued under stock option

and other employee benefit plans 7 9,392 2,304Tax benefit of employee stock benefit

plan transactions 5,693

Balance – December 31, 1999 540 899,978 (12,039) (78,327) (96,074)Net income $ 27,660 27,660

Other comprehensive income (loss):Foreign currency translation (25,313)Other 247

Total other comprehensive income (loss) (25,066) (25,066)Comprehensive income $ 2,594

Common stock issued under stock optionand other employee benefit plans (30,091) 96,074

Tax benefit of employee stock benefitplan transactions 59,624

Balance – December 31, 2000 $540 $929,511 $ (37,105) $ (50,667) $ —


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Summary of Major Accounting Policies

Principles of Consolidation — The consolidated financial statements include the accounts of the Company and all majority-ownedsubsidiaries. Investments of 50% or less in affiliated companies are accounted for using the equity method. The Company’s oper-ations are organized into four separate business segments or divisions, each with a President who reports to the Company’s Chairmanand Chief Executive Officer. The four segments are Cameron, Cooper Cameron Valves (CCV), Cooper Energy Services (CES) andCooper Turbocompressor (CTC). Additional information regarding each segment may be found in Note 13 of the Notes toConsolidated Financial Statements.

Estimates in Financial Statements — The preparation of the financial statements in conformity with generally accepted account-ing principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilitiesand disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues andexpenses during the reporting period. Actual results could differ from these estimates.

Revenue Recognition — Revenue is recognized in accordance with invoice or contractual terms at the time of shipment or theperformance of services except in the case of certain larger, long lead time orders at Cooper Energy Services which, prior to the saleof the rotating business in September 1999, were accounted for using the percentage of completion method. Under this method,revenue was recognized as work progressed in the ratio that costs incurred bore to estimated total costs. The aggregate of costsincurred reduced net inventories while the revenue recognized was shown as a receivable.

Inventories — Inventories are carried at cost or, if lower, net realizable value. On the basis of current costs, 71% of inventoriesin 2000 and 68% in 1999 are carried on the last-in, first-out (LIFO) method. The remaining inventories, which are located outsidethe United States, are carried on the first-in, first-out (FIFO) method.

Plant and Equipment — Depreciation is provided over the estimated useful lives of the related assets, or in the case of assetsunder capital leases, over the related lease term, if less, using primarily the straight-line method. This method is applied to groupasset accounts which in general have the following lives: buildings – 10 to 40 years; machinery and equipment – 3 to 18 years; andtooling, dies, patterns and all other – 5 to 10 years.

Intangibles — Intangibles consist primarily of goodwill related to purchase acquisitions. With minor exceptions, the goodwillis being amortized over 40 years from respective acquisition dates. The carrying value of the Company’s goodwill is reviewed bydivision at least annually or whenever there are indications that the goodwill may be impaired.

Income Taxes — Income tax expense includes U.S. and foreign income taxes, including U.S. federal taxes on undistributed earn-ings of foreign subsidiaries to the extent such earnings are planned to be remitted. Taxes are not provided on the translation com-ponent of comprehensive income since the effect of translation is not considered to modify the amount of the earnings that are plannedto be remitted.

Environmental Remediation and Compliance — Environmental remediation and postremediation monitoring costs are accruedwhen such obligations become probable and reasonably estimable. Such future expenditures are not discounted to their presentvalue. Environmental costs that are capitalized are depreciated generally utilizing a 15-year life.

Product Warranty — Estimated warranty expense is accrued either at the time of sale or, in most cases, when specific warrantyproblems are encountered. Adjustments to the accruals are made periodically to reflect actual experience.

Stock Options and Employee Stock Purchase Plan — Options to purchase Common stock are granted to certain executive officersand key employees at 100% of the market value of the Company’s stock at the date of grant. As permitted, the Company followsAccounting Principles Board Opinion No. 25 and, as a result, no compensation expense is recognized under its stock option plansor the Employee Stock Purchase Plan.

Derivative Financial Instruments — The Company periodically enters into interest rate swap agreements that modify the inter-est characteristics of its outstanding debt. Interest rate differentials to be paid or received as a result of interest rate swap agree-ments are recognized over the lives of the swaps as an adjustment to interest expense. Gains and losses on early terminations ofthese agreements would be deferred and amortized as an adjustment to interest expense over the remaining term of the originallife of the swap agreement. The fair value of swap agreements and changes in fair value as a result of changes in market interestrates are not recognized in the financial statements. Additionally, treasury locks, or forward rate agreements, were utilized inprior years to hedge the interest rate on prospective long-term debt issuances. These treasury locks were replaced in March 1999with interest rate swaps, which were subsequently terminated in December 1999. The unrealized net gain from these transac-tions is being amortized over the remaining term of the original life of the interest rate swaps (see Note 10 of the Notes toConsolidated Financial Statements for further information).

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39

The Company also has foreign currency forward contracts to hedge its cash flow exposure on significant transactionsdenominated in currencies other than the U.S. dollar. These contracts are entered into for periods consistent with the terms of the underlying transactions. The Company does not engage in speculation. Unrealized gains and losses on foreign currencyforward contracts are deferred and recognized as an adjustment to the basis of the underlying transaction at the time the foreigncurrency transaction is completed.

Cash Equivalents — For purposes of the Consolidated Cash Flows statement, the Company considers all investments purchasedwith original maturities of three months or less to be cash equivalents.

New Accounting Pronouncements — Statement of Financial Accounting Standards (SFAS) No. 133 (Accounting for DerivativeInstruments and Hedging Activities), to be adopted in the first quarter of 2001, will require the Company to recognize all deriva-tives on its balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the deriv-ative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the changein fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive incomeuntil the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value will be immediatelyrecognized in earnings. Given the limited number of derivative transactions in which the Company typically engages, the effectof the new standard will not be material when adopted and is not currently expected to be material in the future.

Note 2: Nonrecurring/Unusual Charges (Credits)The nonrecurring/unusual charges (credits) by segment for the last three years were as follows:


(dollars in thousands) 2000 1999 1998

Cameron $ 8,121 $ 15,881 $ 6,063CCV 1,448 9,873 7,796CES 67,503 29,385 7,810CES - Gain on sale of rotating compressor product line — (45,262) —CTC 327 708 287

$ 77,399 $ 10,585 $ 21,956

During 2000, the Company recorded approximately $77,399,000 ($55,847,000 in 1999) of “nonrecurring/unusual charges.” Ofthe total charges recorded in 2000, approximately $48,277,000 relate to new actions and decisions made during 2000 and the remain-der relate to prior year actions and decisions where the costs under existing accounting rules were required to be expensed as incurred.Of the 2000 total, approximately $36,966,000 represented non-cash write-offs or write-downs of tangible and intangible assets and$40,433,000 reflected either cash expenditures or accruals for cash that will be spent in future periods. Of the cash total, approxi-mately $12,168,000 related to employee severance for approximately 350 employees and other employee costs including workmen’scompensation, medical, pay-to-stay agreements and similar items, $8,841,000 related to personnel and equipment relocation,$5,378,000 related to facility clean-up (including environmental) and rearrangement, $6,356,000 related to operating costs forredundant facilities being held for sale and $7,690,000 related to productivity degradation, including outsourcing during phase-out and other costs. The major projects included approximately $32,659,000 related to the fourth quarter decision to exit CES’s newunit Superior engine product line and the resulting shutdown of its manufacturing facility in Springfield, Ohio; $14,126,000 relatedto remaining costs associated with CES’s late 1999 decision to cease all manufacturing and foundry operations in Grove City,Pennsylvania; $13,503,000 resulting from the relocation of all manufacturing, warehousing and other operations from Mt. Vernon,Ohio (original segment headquarters for CES) to other locations pursuant to the 1999 sale of CES’s rotating compressor businessto Rolls-Royce plc; $6,634,000 related to the write-off of the Canadian translation component in connection with the sale of this busi-ness; $4,058,000 related to the relocation of Cameron’s drilling BOP stack and subsea “Christmas tree” manufacturing from VillePlatte, Louisiana to Liberty, Texas (subsea trees) and Beziers, France (BOPs); $2,826,000 related to the shutdown of Cameron’s man-ufacturing facility in Vienna, Austria and relocation of this capacity to other European locations; and $3,593,000 associated withvarious facility shutdown and realignment costs and other actions for each of the divisions. Except for additional costs that willbe expensed in 2001 related to the shutdown of the Superior engine business, the Company currently anticipates that its resultswill not include any other non-recurring/unusual charges during 2001. The Company currently estimates that the additional costs,which will be incurred during the first two quarters of 2001, will total between $20,000,000 and $25,000,000 and will include employeeseverance and related costs, employee and equipment relocation, operating period costs related to the Springfield facility duringthe shutdown and other items which are required to be recognized either when the liability is incurred or when the cash is actu-ally spent. The Company has decided to include the operating period costs associated with the Superior engine business duringits shutdown on the “nonrecurring/unusual” expense line because these costs are being eliminated by the shutdown and becausethe small amount of sales which the new unit engine business will have during 2001 are not anticipated to generate any operating

40

profit before period costs. For the year ended December 31, 2000, the Superior engine business generated revenues of $14,467,000and incurred a loss before shared general and administrative costs, taxes and nonrecurring/unusual charges of approximately$12,900,000.

On September 30, 1999, the Company completed the sale to Rolls-Royce plc of the CES division’s rotating compressor prod-uct line, which included centrifugal compressors, power turbines and En-Tronic® controls. The operations that were sold had primary facilities in Mt. Vernon, Ohio, Liverpool, United Kingdom and Hengelo in the Netherlands. The Company received$203,160,000 in cash in connection with the sale and will receive in 2001 an additional $2,200,000, based on the final balance sheetfor the business. Included in the sale was the Company’s 50% interest in Cooper Rolls, Inc., a marketing joint venture companyequally owned with Rolls-Royce prior to the transaction. The Company recorded a pre-tax gain from the sale totaling $45,262,000.The rotating compressor product line generated revenues through September 30, 1999 of approximately $93,100,000 and incurreda loss, including an allocation of certain shared general and administrative costs, over the same period before interest, taxes, depre-ciation, amortization and nonrecurring charges of approximately $8,400,000.

Cameron recorded approximately $13,176,000 during 1999 for employee severance, primarily associated with the continuedrationalization of its operations in the U.S., the U.K. and France in response to decreased market demand that began in 1998. Theremaining nonrecurring charges for 1999 relate primarily to employee severance and other costs associated with the closure of thissegment’s manufacturing facility in Austria, which was initiated at the end of the second quarter. The charges during 1998 con-sisted primarily of costs associated with the termination of specific employees in connection with the decline in market activitydescribed above. Nearly three-fourths of the costs incurred during 1998 related to this segment’s operations in the U.S., the U.K.and France.

The $17,669,000 of nonrecurring/unusual charges recorded by CCV during 1998 and 1999 relate to: (i) the shutdown (includ-ing severance, relocation and other costs) of a manufacturing facility in Missouri City, Texas (announced in the third quarter of 1998),(ii) one-time acquisition costs relating to the 1998 acquisition of Orbit Valve International, Inc. (see Note 3 of the Notes toConsolidated Financial Statements) and (iii) severance, primarily associated with employment reductions at this segment’s oper-ations in Beziers, France. The transfer of production from the Missouri City facility to another facility in Oklahoma City, Oklahomawas substantially completed during the early part of 1999 and the Missouri City facility will be sold in due course.

CES recorded approximately $29,385,000 during 1999 (including nearly $15,212,000 of non-cash asset impairment charges)relating to employee severance, the announced shutdown of the Company’s underutilized foundry and associated machiningoperations in Grove City, Pennsylvania and the relocation of its compressor plant in Mt. Vernon, Ohio. The remaining 1999 costsprimarily relate to employee relocations and various facility/warehouse consolidations. The costs incurred during 1998 wereassociated with the severance and relocation of salaried personnel in the Mt. Vernon and Grove City facilities.

In all three years, CTC’s nonrecurring charges related to employee severance associated with declining demand in that segment’s markets.

The cash flow effect of the above actions (excluding proceeds from the sale of the rotating business) was approximately$37,488,000 in 2000, $37,409,000 in 1999 and $10,406,000 in 1998.

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Note 3: Acquisitions/DispositionsDuring 2000, CES sold its Canadian aftermarket operations to a company that is now a distributor of CES’s products in that

country. Proceeds from the sale totaled approximately $10,800,000. Because the sale resulted in the cessation of all of CES’s oper-ations in Canada, a $6,634,000 non-cash, non-tax-deductible write-off of the accumulated translation component for the Canadianlegal entity was recorded as a nonrecurring/unusual charge in addition to what was otherwise a break-even sale. Additionally,Cameron sold its interest in one of its joint ventures in Venezuela to the majority partner and, near year-end, made a small prod-uct line acquisition. CCV acquired a valve repair business located in Houston, Texas early in the year at a cash cost of approxi-mately $4,200,000. Both acquisitions are being accounted for under the purchase method of accounting. Goodwill associated withthese acquisitions was not material.

During 1999, in addition to the sale of the rotating compressor product line by CES (see Note 2 of the Notes to ConsolidatedFinancial Statements), Cameron acquired the remaining interest in another joint venture located in Venezuela in which it previ-ously held a 49% equity interest. Prior to the acquisition, which was accounted for under the purchase method of accounting, theCompany included its share of the operating results of the joint venture in its results of operations using the equity method. Theacquisition resulted in additional goodwill of approximately $3,500,000.

Effective April 2, 1998, the Company acquired Orbit Valve International, Inc. for approximately $104,000,000 in cash andassumed indebtedness. Orbit, which has been integrated into CCV, is based in Little Rock, Arkansas and manufactures and sellshigh-performance valves for the oil and gas and petrochemical industries. Orbit generated revenues of approximately $71,000,000from the acquisition date through December 31, 1998. Additionally, during July 1998, the Company acquired certain assets andassumed certain liabilities of Brisco Engineering Ltd., a U.K. company, for approximately $12,400,000 in cash and debt. The acquiredoperations, which participate in the repair and aftermarket parts business for control systems, have been consolidated into theCameron organization. The two purchase acquisitions resulted in additional goodwill of $63,786,000. Three other small productline acquisitions were also made during 1998 to supplement the Company’s aftermarket operations. The results of operationsfrom all acquisitions have been included with the Company’s results for the year ended December 31, 1998 from the respectiveacquisition dates forward.

Note 4: ReceivablesDecember 31,

(dollars in thousands) 2000 1999

Trade receivables $ 261,197 $ 243,336Other receivables 10,651 31,152Allowance for doubtful accounts (3,080) (2,977)

$ 268,768 $ 271,511

Note 5: InventoriesDecember 31,


Raw materials $ 36,286 $ 43,851Work-in-process 108,418 126,949Finished goods, including parts and subassemblies 293,187 301,910Other 2,138 2,712

440,029 475,422Excess of current standard costs over LIFO costs (55,148) (58,951)Allowance for obsolete inventory (12,141) (16,433)

$ 372,740 $ 400,038

Note 6: Plant and Equipment and Intangibles

December 31,


Plant and equipment:Land and land improvements $ 35,540 $ 36,954Buildings 173,555 174,645Machinery and equipment 406,239 402,187Tooling, dies, patterns, etc. 58,906 55,845Assets under capital leases 22,964 22,684All other 99,450 102,637Construction in progress 35,659 17,253

832,313 812,205Accumulated depreciation (429,093) (392,592)

$ 403,220 $ 419,613

Intangibles:Goodwill $ 437,480 $ 455,115Assets related to pension plans 371 371Other 58,531 53,297

496,382 508,783Accumulated amortization (234,782) (227,829)

$ 261,600 $ 280,954

Note 7: Accounts Payable and Accrued Liabilities

December 31,


Trade accounts and accruals $ 186,153 $ 230,286Salaries, wages and related fringe benefits 59,770 55,456Product warranty, late delivery, and similar costs 16,812 20,187Deferred income taxes 27,269 34,962Nonrecurring/unusual charges 10,488 10,328Other (individual items less than 5% of total current liabilities) 24,512 43,752

$ 325,004 $ 394,971

Note 8: Employee Benefit Plans

PostretirementPension Benefits Benefits

(dollars in thousands) 2000 1999 1998 2000 1999 1998

Service cost $ 7,569 $ 9,598 $ 9,287 $ 67 $ 168 $ 189Interest cost 17,825 18,366 17,929 3,123 2,928 3,254Expected return on plan assets (31,921) (30,653) (28,425) — — —Amortization of prior service cost (188) (266) (404) (200) (300) (700)Amortization of (gains) losses and other (9,442) (5,802) (4,320) (10,100) (10,600) (9,700)

Net periodic benefit income (16,157) (8,757) (5,933) (7,110) (7,804) (6,957)Curtailment (gain) loss 53 (446) — (300) — —Settlement gain (1,484) (2,087) — — — —Termination benefit expense 304 — — — — —

Total net benefit income $ (17,284) $ (11,290) $ (5,933) $ (7,410) $ (7,804) $ (6,957)

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(dollars in thousands) 2000 1999 2000 1999

Change in benefit obligation:Benefit obligation at beginning of year $ 275,707 $ 289,547 $ 43,708 $ 51,298Service cost 7,569 9,598 67 168Interest cost 17,825 18,366 3,123 2,928Plan participants’ contributions 754 911 — —Amendments 350 1,059 — —Change in discount rate/remeasurement impact — (14,507) — —Actuarial (gains) losses (3,594) (3,743) (8) (5,429)Merger of acquired company plan 4,248 — — —Exchange rate changes (8,752) (4,211) — —Curtailment results 121 612 (139) —Settlement results 4,411 4,314 — —Termination benefit results 304 — — —Benefits paid directly or from plan assets (25,286) (26,239) (4,840) (5,257)

Benefit obligation at end of year $ 273,657 $ 275,707 $ 41,911 $ 43,708



Change in plan assets:Fair value of plan assets at beginning of year $ 361,531 $ 342,130 $ — $ —Actual return on plan assets 15,330 42,212 — —Actuarial gains (losses) 8,551 7,435 — —Company contributions 158 705 4,840 5,257Plan participants’ contributions 754 911 — —Merger of acquired company plan 5,310 — — —Exchange rate changes (10,873) (4,151) — —Impact of remeasurement — (1,875) — —Benefits paid from plan assets (24,942) (25,836) (4,840) (5,257)

Fair value of plan assets at end of year $ 355,819 $ 361,531 $ — $ —



Plan assets in excess of (less than) benefitobligations at end of year $ 82,162 $ 85,824 $ (41,911) $ (43,708)

Unrecognized net (gain) loss (14,688) (33,478) (6,223) (16,315)Unrecognized prior service cost (2,099) (2,577) (439) (800)Unrecognized net transition (asset) 151 266 — —Prepaid (accrued) pension cost 65,526 50,035 (48,573) (60,823)

Underfunded plan adjustments recognized:Accrued minimum liability (888) (888) — —Intangible asset 371 371 — —Accumulated other comprehensive income, net of tax 388 388 — —

Net assets (liabilities) recognized on balancesheet at end of year $ 65,397 $ 49,906 $ (48,573) $ (60,823)

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2000 1999 2000 1999

Weighted-average assumptions as ofDecember 31:

Domestic plans:Discount rate 7.75% 7.5% 7.65% 7.53%Expected return on plan assets 9.25% 9.25%Rate of compensation increase 4.5% 4.5%Health care cost trend rate 7.5% 7.5%

International plans:Discount rate 6.0 - 6.25% 6.0 - 6.25%Expected return on plan assets 6.0 - 8.5% 6 - 9%Rate of compensation increase 3.5 - 4.5% 3.5 - 4.5%

The rate of compensation increase is based on an age-grade scale ranging from 7.5% to 3.0% with a weighted-average rate ofapproximately 4.5%.

The health care cost trend rate is assumed to decrease gradually from 7.5% to 5% by 2006 and remain at that level thereafter.A one-percentage-point change in the assumed health care cost trend rate would have the following effects:

1 - Percentage 1 - Percentage(dollars in thousands) point increase point decrease

Effect on total of service and interestcost components in 2000 $ 229 $ (204)

Effect on postretirement benefit obligationas of December 31, 2000 $ 2,956 $ (2,640)

Amounts applicable to the Company’s pension plans with projected and accumulated benefit obligations in excess of plan assetsare as follows:


Projected benefit obligation $ (8,514) $ (8,675)Accumulated benefit obligation $ (7,595) $ (7,767)Fair value of plan assets $ 2,669 $ 2,728

The Company sponsors the Cooper Cameron Corporation Retirement Plan (Retirement Plan) covering all salaried U.S.employees and certain domestic hourly employees, as well as separate defined benefit pension plans for employees of its U.K. andGerman subsidiaries, and several unfunded defined benefit arrangements for various other employee groups.

Aggregate pension expense (income) amounted to $(9,501,000) in 2000, $(1,851,000) in 1999 and $5,121,000 in 1998. TheCompany’s income with respect to the defined benefit pension plans is set forth in the table above. The Company’s change in thediscount rate for domestic pension plans from 7.5% in 1999 to 7.75% in 2000 did not affect 2000 income but will increase pensionincome slightly in 2001. The change in 1999 to 7.5% from 6.5% increased 1999 pension income by approximately $900,000 and year2000 pension income by $2,332,000. Expense with respect to various defined contribution plans for the years ended December 31,2000, 1999 and 1998 amounted to $7,783,000, $9,439,000 and $11,054,000, respectively.

In 2000, a settlement gain of $1,484,000 ($2,087,000 in 1999) was recognized as a result of the large number of payouts duringthe year which required accelerated recognition of a portion of the Retirement Plan’s unrecognized net gain.

In connection with the sale of the rotating compressor business in September 1999, the Company has retained all defined benefit pension and postretirement benefit liabilities earned by employees of this business through the date of sale.

The assets of the domestic and foreign plans are maintained in various trusts and consist primarily of equity and fixed income securities.

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In addition, the Company’s full-time domestic employees who are not covered by a bargaining unit are also eligible to par-ticipate in the Cooper Cameron Corporation Retirement Savings Plan. Under this plan, employees’ savings deferrals are partiallymatched with shares of the Company’s Common stock. The Company’s expense under this plan equals the matching contribu-tion under the Plan’s formula. Expense for the years ended December 31, 2000, 1999 and 1998 amounted to $7,349,000, $7,598,000and $8,432,000, respectively.

The Company’s salaried employees also participate in various domestic employee welfare benefit plans, including medical,dental and prescriptions, among other benefits for active employees. Salaried employees who retired prior to 1989, as well as certain other employees who were near retirement at that date and elected to receive certain benefits, have retiree medical and pre-scription benefits and, if retirement occurred prior to January 1, 1998, have life insurance benefits, while active salaried employeesdo not have postretirement health care or life insurance benefits.

The hourly employees have separate plans with varying benefit formulas, but currently active employees, except for certainemployees similar to those described above, will not receive health care benefits after retirement.

All of the welfare benefit plans, including those providing postretirement benefits, are unfunded.

Note 9: Stock Options and Employee Stock Purchase Plan

Number of SharesLong-term and

Broad Based Non-employee WeightedIncentive Director Average

Plans Plan Exercise Prices

Stock options outstanding at December 31, 1997 6,046,647 243,592 $ 26.02

Options granted 2,485,019 96,540 $ 35.32Options cancelled (154,352) — $ 33.00Options exercised (1,324,498) (21,592) $ 16.65Stock options outstanding at December 31, 1998 7,052,816 318,540 $ 30.84

Options granted 1,646,113 61,740 $ 41.35Options cancelled (230,004) — $ 36.80Options exercised (884,744) — $ 17.74Stock options outstanding at December 31, 1999 7,584,181 380,280 $ 34.38

Options granted 2,472,205 72,548 $ 58.24Options cancelled (206,242) — $ 31.74Options exercised (4,382,012) (128,054) $ 31.80

Stock options outstanding at December 31, 2000 1 5,468,132 324,774 $ 46.96

Stock options exercisable at December 31, 2000 1 2,215,089 237,294 $ 46.80

1 Exercise prices range from $8.329 to $79.9375 per share.

Options are granted to key employees under the Long-term and Broad Based Incentive Plans and generally become exercis-able on the first anniversary date following the date of grant in one-third increments each year or in annual increments of one-sixth,one-third, one-third and one-sixth. In 1998, options that fully vested at the end of 1999 were also granted to a limited number ofemployees. These options all expire ten years after the date of grant. Certain key executives also elected in 2000 to receive optionsin lieu of salary for the year ended December 31, 2001. The options granted under the Options in Lieu of Salary Program gener-ally become exercisable at the end of the related salary period and expire five years after the beginning of the salary period. Similaroptions were not granted in 1999 with respect to salary for the year 2000 but were granted in 1998 for the salary year beginning onJanuary 1, 1999.

Under the Company’s Non-employee Director Stock Option Plan, non-employee directors receive a grant of 6,000 stock optionsannually. In addition, directors are permitted to take either a portion of or their full annual retainer in cash ($30,000) or receive, inlieu of cash, additional stock options. All directors elected to receive all of their retainer in stock options for 2000, 1999 and 1998.The election to receive their entire retainer in stock options and the grant of these options, covering 25,740 shares, for the year 2001was made during 2000. Similarly, in 1999, 25,740 shares were granted for the year 2000 and, in 1998, 25,740 shares were grantedfor the year 1999 in addition to 34,800 shares for the year 1998. The exercise price of each option is based on the fair market valueof the Company’s stock at the date of grant. The options generally expire five years after the date of grant and become exercisable

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one year following the date of grant. In the case of options granted in lieu of retainer, the options become exercisable one year following the beginning of the retainer period and expire five years following the beginning of the retainer period.

As of December 31, 2000, shares reserved for future grants under the Long-term Incentive, Broad Based Incentive, and Non-employee Director Stock Option Plans were 2,413,757, 2,800 and 395,198, respectively. The weighted-average remaining contractual life of all options at December 31, 2000 is approximately 7.2 years.

Pro forma information is required by SFAS No. 123 to reflect the estimated effect on net income and earnings per share as ifthe Company had accounted for the stock option grants and the Employee Stock Purchase Plan (ESPP) using the fair value methoddescribed in that Statement. The fair value was estimated at the date of grant using a Black-Scholes option pricing model with thefollowing weighted-average assumptions for 2000, 1999 and 1998, respectively: risk-free interest rates of 5.8%, 5.5% and 5.2%; dividend yields of zero for each year; volatility factors of the expected market price of the Company’s Common stock of .488, .494and .482; and a weighted-average expected life of the options of 3.4, 3.6 and 4.0 years. These assumptions resulted in a weighted-average grant date fair value for options and the ESPP of $24.29 and $18.98, respectively, for 2000; $17.02 and $10.56, respectively,for 1999; and $15.18 and $10.11, respectively, for 1998. For purposes of the pro forma disclosures, the aggregate estimated fair valueis amortized to expense over the vesting period. Reflecting the amortization of this hypothetical expense in 2000, 1999 and 1998results in pro forma net income (loss) and diluted earnings (loss) per share of $(4,934,000) and $(0.09), respectively, for 2000;$20,417,000 and $0.36, respectively, for 1999; and $118,562,000 and $2.11, respectively, for 1998.

Employee Stock Purchase Plan

Under the Cooper Cameron Employee Stock Purchase Plan, the Company is authorized to sell up to 2,000,000 shares of Commonstock to its full-time employees in the United States, U.K., Ireland, Singapore and Canada, nearly all of whom are eligible to partici-pate. Under the terms of the Plan, employees may elect each year to have up to 10% of their annual compensation withheld to pur-chase the Company’s Common stock. The purchase price of the stock is 85% of the lower of the beginning-of-plan year or end-of-planyear market price of the Company’s Common stock. Under the 2000/2001 plan, over 1,600 employees elected to purchase approxi-mately 108,000 shares of the Company’s Common stock at $55.83 per share, or 85% of the market price of the Company’s Commonstock on July 31, 2001, if lower. Atotal of 163,454 shares were purchased at $31.03 per share on July 31, 2000 under the 1999/2000 plan.

Note 10: Long-term Debt

December 31,


Floating-rate revolving credit advances $ 170,463 $ 125,341Other long-term debt 14,493 75,059Obligations under capital leases 7,316 9,932

192,272 210,332Current maturities (4,212) (14,472)

Long-term portion $ 188,060 $ 195,860

The Company is party to a long-term credit agreement (the Credit Agreement) with various banks which provides for an aggregate unsecured borrowing capacity of $475,000,000 of floating-rate revolving credit advances maturing March 31, 2002. TheCompany is required to pay a facility fee on the committed amount under the Credit Agreement, which at December 31, 2000 equalled.075% annually.

In addition to the above, the Company also has other unsecured and uncommitted credit facilities available both domesticallyand to its foreign subsidiaries.

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At December 31, 2000, the weighted-average interest rate on the revolving credit advances was 6.82% (6.35% at December 31,1999). The average interest rate on the remaining debt was 6.24% at December 31, 2000 (6.86% at December 31, 1999) excludingapproximately $1,288,000 of dollar equivalent local currency indebtedness in Brazil at a notional rate (before currency effects) of 22.4% annually.

At December 31, 2000, the Company reclassified as long-term $4,058,000 ($54,529,000 at December 31, 1999) of indebtednesswhich by its terms represents a current liability reflecting the Company’s intention and ability to refinance such amounts under theCredit Agreement. As a result, future maturities of the floating-rate revolving credit advances and other long-term debt are $350,000and $184,606,000 for the years 2001 and 2002, respectively.

During March 1999, the Company entered into interest rate swaps with various financial institutions to effectively convert$175,000,000 of outstanding floating rate debt to fixed rate debt at a weighted-average interest rate of 6.46%. This transaction replacedexisting treasury locks, or forward rate agreements. The Company paid $8,235,000 to the counterparties to the treasury locks inconnection with the termination of these agreements. In December 1999, the Company terminated the interest rate swaps, receiving$11,239,000 from the counterparties to these agreements. Of the net $3,004,000 gain, $899,000 was recognized in the fourth quarterof 1999 and the remainder is being amortized to interest expense over the remaining 10-year life of the interest rate swaps.

During January 2001, the Company entered into interest rate swaps which effectively converted $155 million of outstandingfloating rate debt to fixed rate debt at a weighted-average interest rate of 5.24%. The majority of these swaps extend through March 2002.

At December 31, 2000, the Company had $304,537,000 of committed borrowing capacity available plus additional uncommittedamounts available under various other borrowing arrangements.

Under the terms of the Credit Agreement, the Company is required to maintain certain financial ratios including a debt-to-capitalization ratio of not more than 50%, except in certain instances involving acquisitions, and a coverage ratio of earnings beforeinterest, taxes, depreciation and amortization (EBITDA) less capital expenditures equal to at least 2.5 times interest expense. TheCredit Agreement also specifies certain limitations regarding additional indebtedness outside the Credit Agreement and theamounts invested in the Company’s foreign subsidiaries. The Company has been, throughout all periods reported, and was, atDecember 31, 2000, in compliance with all loan covenants.

For the years 2000, 1999 and 1998, total interest expense was $18,038,000, $27,834,000 and $32,721,000, respectively. Interestpaid by the Company in 2000, in 1999 and in 1998 (after considering $2,187,000 of interest capitalized during 1998) is not materi-ally different than the amounts expensed.

The Company leases certain facilities, office space, vehicles and office, data processing and other equipment under capital andoperating leases. The obligations with respect to these leases are generally for five years or less and are not considered to be mate-rial individually or in the aggregate.

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Note 11: Income Taxes


(dollars in thousands) 2000 1999 1998

Income (loss) before income taxes:U.S. operations $ (26,137) $ 13,536 $ 58,976Foreign operations 69,910 57,380 136,752

Income before income taxes $ 43,773 $ 70,916 $ 195,728

Income taxes:Current:

U.S. federal $ 54,242 $ 10,805 $ 14,973U.S. state and local and franchise 9,432 4,501 3,934Foreign 16,375 23,296 34,628

80,049 38,602 53,535Deferred:

U.S. federal (61,318) (6,829) 126U.S. state and local (9,221) (1,026) 19Foreign 6,603 (2,833) 5,892

(63,936) (10,688) 6,037Income tax provision $ 16,113 $ 27,914 $ 59,572

Items giving rise to deferred income taxes: Reserves and accruals $ 12,895 $ (16,349) $ 812Inventory allowances, full absorption and LIFO 5,842 (8,315) 3,906Percentage of completion income (recognized) not

recognized for tax — (2,018) (2,877)Pension and postretirement benefit income not

currently taxable 9,234 7,162 1 4,856 1

U.S. tax deductions less than (in excess of) amounts currently deductible (85,635) 15,744 (5,927)

Other (6,272) (6,912) 1 5,267 1

Deferred income taxes $ (63,936) $ (10,688) $ 6,037

The differences between the provision for income taxes and incometaxes using the U.S. federal income tax rate were as follows:

U.S. federal statutory rate 35.00% 35.00% 35.00%Nondeductible goodwill 7.32 4.48 1.52State and local income taxes (0.03) 2.37 0.93Tax exempt income (1.60) (0.99) (1.43)Foreign statutory rate differential (11.61) (2.75) (2.30)Change in valuation of prior year tax assets (4.34) (3.24) (1.04) 1

Foreign losses (receiving) not receiving a tax benefit (1.08) 2.64 (1.62) 1

Translation write-offs not deductible for tax 7.27 — —Nondeductible expenses 2.40 1.28 1 0.41 1

All other 3.48 0.57 1 (1.03) 1

Total 36.81% 39.36% 30.44%

Total income taxes paid $ 14,724 $ 42,696 $ 22,166

1 Revised for comparability.

The year-to-year percentage changes above are more indicative of year-to-year changes in pre-tax income than changes in theamount of deductible or non-deductible items, except for the translation write-offs that should not recur in future periods.

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December 31,


Components of deferred tax balances:Deferred tax liabilities:

Plant and equipment $ (34,879) $ (38,415)Inventory (51,470) (45,628)Pensions (24,272) (18,242) 1

Other (19,687) (27,554) 1

Total deferred tax liabilities (130,308) (129,839)

Deferred tax assets:Postretirement benefits other than pensions 18,579 23,265Reserves and accruals 39,088 51,916Net operating losses and related deferred tax assets 98,014 9,058Other 1,440 7,021

Total deferred tax assets 157,121 91,260

Valuation allowance (16,201) (18,695)

Net deferred tax assets (liabilities) $ 10,612 $ (57,274)

1 Revised for comparability

During each of the last three years, certain of the Company’s international operations have incurred losses that have not beentax benefited, while others, that had losses in a prior year, generated earnings in a subsequent year that utilized the prior yearunrecorded benefit of the loss. In addition, during 2000, 1999 and 1998, respectively, $1,900,000, $2,300,000 and $2,032,000 of deferredtax assets that had been reserved in prior years were realized and the related reserves were reversed. The effect of these items onthe Company’s overall effective tax rate are included in the rate reconciliation captions: “Change in valuation of prior year tax assets”and “Foreign losses (receiving) not receiving a tax benefit”. As a result of all of the foregoing, the valuation allowances establishedin prior years were reduced in 2000, 1999 and 1998 by $2,494,000, $425,000 and $5,201,000, respectively, with a corresponding reduc-tion in the Company’s income tax expense.

During 2000, the Company domestically had tax deductions, including those related to stock options (discussed below), whichwere greater than the amounts that could be utilized currently as a reduction of actual taxes payable. As a result, the Companypaid essentially no U.S. federal income tax in 2000 and recorded $85,635,000 of deferred tax assets related to these excess deduc-tions that will require taxable income in future years in order to be realized. The Company has until the year 2020 to utilize theseexcess deductions. As a result, in management’s judgement there is presently essentially no risk that this asset will not be realized.In 1999, all of the deferred tax assets recorded in 1998 and prior years with respect to U.S. taxable losses were utilized such that,along with other deductions originating in 1999, the Company also paid only a small amount of actual tax during 1999 on its domes-tic earnings, including the gain on the sale of the rotating compressor product line.

During 2000, 1999, and 1998, a major item giving rise to the domestic excess deductions was the tax benefit that the Companyreceives with respect to certain employee stock benefit plan transactions. This benefit, which is credited to capital in excess of parvalue, amounted to $59,624,000, $5,693,000 and $15,223,000 in 2000, 1999 and 1998, respectively.

The Company’s tax provision includes U.S. tax expected to be payable on the foreign portion of the Company’s income beforeincome taxes when such earnings are remitted. The Company’s accruals are sufficient to cover the additional U.S. taxes estimatedto be payable on the earnings that the Company anticipates will be remitted. Through December 31, 2000, this amounted to essen-tially all unremitted earnings of the Company’s foreign subsidiaries except certain unremitted earnings in the U.K., Ireland andSingapore, which are considered to be permanently reinvested.

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Note 12: Common Stock, Preferred Stock and Retained Deficit

Common Stock

Under its Amended and Restated Certificate of Incorporation, the Company is authorized to issue up to 150,000,000 shares ofcommon stock, par value $.01 per share.

In November 1998, the Company’s board of directors approved the repurchase of up to 10,000,000 shares of Common stockfor use in the Company’s various employee stock ownership, option and benefit plans. In December 1999, the Company exercisedits option under outstanding forward purchase agreements to purchase 3,515,900 shares of its common stock from various thirdparties at a specified price as defined in the agreements. The total amount paid was $98,378,000, which includes $6,046,000 of pre-paid acquisition costs. In addition, the Company also purchased 709,700 shares in January 1998. Treasury shares were utilized tosatisfy stock option exercises and stock issuances under the Employee Stock Purchase Plan. At December 31, 2000, 9,774,013 sharesof unissued Common stock were reserved for future issuance under the various employee benefit plans.

Preferred Stock

The Company is authorized to issue up to 10,000,000 shares of preferred stock, par value $.01 per share. At December 31,2000, no preferred shares were issued or outstanding. Shares of preferred stock may be issued in one or more series of classes,each of which series or class shall have such distinctive designation or title as shall be fixed by the Board of Directors of the Companyprior to issuance of any shares. Each such series or class shall have such voting powers, full or limited, or no voting powers, andsuch preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictionsthereof, as shall be stated in such resolution or resolutions providing for the issuance of such series or class of preferred stock asmay be adopted by the Board of Directors prior to the issuance of any shares thereof. A total of 1,500,000 shares of Series A JuniorParticipating Preferred Stock has been reserved for issuance upon exercise of the Stockholder Rights described below.

Stockholder Rights Plan

On May 23, 1995, the Company’s Board of Directors declared a dividend distribution of one Right for each then-current andfuture outstanding share of Common stock. Each Right entitles the registered holder to purchase one one-hundredth of a share ofSeries A Junior Participating Preferred Stock of the Company, par value $.01 per share, for an exercise price of $300. Unless earlierredeemed by the Company at a price of $.01 each, the Rights become exercisable only in certain circumstances constituting a poten-tial change in control of the Company, described below, and will expire on October 31, 2007.

Each share of Series A Junior Participating Preferred Stock purchased upon exercise of the Rights will be entitled to certainminimum preferential quarterly dividend payments as well as a specified minimum preferential liquidation payment in the eventof a merger, consolidation or other similar transaction. Each share will also be entitled to 100 votes to be voted together with theCommon stockholders and will be junior to any other series of Preferred Stock authorized or issued by the Company, unless theterms of such other series provides otherwise.

Except as otherwise provided in the Plan, in the event any person or group of persons acquire beneficial ownership of 20% ormore of the outstanding shares of Common stock, each holder of a Right, other than Rights beneficially owned by the acquiringperson or group (which will have become void), will have the right to receive upon exercise of a Right that number of shares ofCommon stock of the Company, or, in certain instances, Common stock of the acquiring person or group, having a market valueequal to two times the current exercise price of the Right.

Retained Deficit

The Company’s retained deficit includes a $441,000,000 charge related to the goodwill write-down that occurred concurrentwith the Company becoming a separate stand-alone entity on June 30, 1995 in connection with the split-off from its former parent,Cooper Industries, Inc. Delaware law, under which the Company is incorporated, provides that dividends may be declared by theCompany’s board of directors from a current year’s earnings as well as from the net of capital in excess of par value less the retaineddeficit. Accordingly, at December 31, 2000, the Company had approximately $878,844,000 from which dividends could be paid.

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Note 13: Industry Segments

The Company’s operations are organized into four separate business segments, each of which is also a division with a Presidentwho reports to the Company’s Chairman and Chief Executive Officer. The four segments are Cameron, Cooper Cameron Valves (CCV),Cooper Energy Services (CES) and Cooper Turbocompressor (CTC). Cameron is a leading international manufacturer of oil and gas pres-sure control equipment, including wellheads, chokes, blowout preventers and assembled systems for oil and gas drilling, productionand transmission used in onshore, offshore and subsea applications. Split out from Cameron as a separately managed business in mid-1995, CCV provides a full range of ball valves, gate valves, butterfly valves and accessories used primarily to control pressures and directoil and gas as they are moved from individual wellheads through transmission systems to refineries, petrochemical plants and other pro-cessing centers. CES designs, manufactures, markets and services natural gas compression equipment including integral engine com-pressors, reciprocating compressors, turbochargers and control systems. Through September 30, 1999, CES operations also included arotating compressor product line. See Note 2 for additional information regarding the sale of this business. CTC provides centrifugalair compressors and aftermarket products. CTC’s customers include manufacturing companies and chemical process industries.

The primary customers of Cameron, CCV and CES are major and independent oil and gas exploration and production companies, foreign national oil and gas companies, drilling contractors, pipeline companies, refiners and other industrial and petrochemical processing companies.

The Company markets its equipment through a worldwide network of sales and marketing employees supported by agentsand distributors in selected international locations. Due to the extremely technical nature of many of the products, the marketingeffort is further supported by a staff of engineering employees.

For the years ended December 31, 2000, 1999 and 1998, the Company incurred research and development costs, designed toenhance or add to its existing product offerings, totaling $27,276,000, $34,827,000 and $33,034,000, respectively. Cameron accountedfor 78%, 78% and 79% of each respective year’s total costs.

(dollars in thousands) For the Year Ended December 31, 2000Corporate

Cameron CCV CES CTC & Other Consolidated

Revenues $ 838,341 $ 221,097 $ 224,822 $ 102,449 $ — $ 1,386,709

EBITDA 2 $ 148,730 $ 37,069 $ 19,504 $ 24,193 $ (14,965) $ 214,531Depreciation and amortization 45,711 11,379 10,727 6,644 860 75,321Interest expense — — — — 18,038 18,038Nonrecurring/unusual charges 8,121 1,448 67,503 327 — 77,399

Income (loss) before taxes $ 94,898 $ 24,242 $ (58,726) $ 17,222 $ (33,863) $ 43,773

Capital expenditures $ 38,615 $ 5,981 $ 19,340 $ 2,572 $ 91 $ 66,599

Total assets $ 884,187 $ 245,653 $ 171,568 $ 106,893 $ 85,572 $ 1,493,873



Revenues 1 $ 817,055 $ 233,581 $ 319,682 $ 104,743 $ — $ 1,475,061

EBITDA 2 $ 139,281 $ 33,368 $ 9,947 $ 22,867 $ (12,412) $ 193,051Depreciation and amortization 44,416 12,965 18,491 6,639 1,205 83,716Interest expense — — — — 27,834 27,834Nonrecurring/unusual charges 15,881 9,873 (15,877) 708 — 10,585

Income (loss) before taxes $ 78,984 $ 10,530 $ 7,333 $ 15,520 $ (41,451) $ 70,916


Total assets $ 908,120 $ 245,102 $ 194,417 $ 101,867 $ 21,213 $ 1,470,719

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Revenues 1 $ 1,024,685 $ 311,791 $ 422,496 $ 134,339 $ — $ 1,893,311

EBITDA 2 $ 214,969 $ 60,906 $ 24,694 $ 32,691 $ (10,381) $ 322,879Depreciation and amortization 34,795 12,509 17,884 6,253 1,033 72,474Interest expense — — — — 32,721 32,721Nonrecurring/unusual charges 6,063 7,796 7,810 287 — 21,956

Income (loss) before taxes $ 174,111 $ 40,601 $ (1,000) $ 26,151 $ (44,135) $ 195,728


Total assets $ 1,041,738 $ 295,327 $ 359,739 $ 112,261 $ 14,538 $ 1,823,603

Geographic Information:December 31, 2000 December 31, 1999 December 31, 1998

Long-lived Long-lived Long-livedRevenues Assets Revenues 1 Assets Revenues 1 Assets

United States $ 750,383 $ 429,611 $ 809,752 $ 445,497 $ 999,192 $ 510,482United Kingdom 204,638 112,149 225,978 123,541 369,713 140,759Other foreign countries 431,688 123,060 439,331 131,529 524,406 132,799

Total $ 1,386,709 $ 664,820 $ 1,475,061 $ 700,567 $ 1,893,311 $ 784,040

1 Revised to include shipping and handling costs as an item in cost of sales rather than a reduction in revenues.2 Earnings before interest, taxes, depreciation and amortization and nonrecurring/unusual charges.

Intersegment sales and related receivables for each of the years shown were immaterial and have been eliminated.For normal management reporting, and therefore the above segment information, consolidated interest expense is treated

as a Corporate expense because debt, including location, type, currency, etc., is managed on a worldwide basis by the CorporateTreasury Department.

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Note 14: Off-Balance Sheet Risk, Concentrations of Credit Risk and Fair Value of Financial Instruments

Off-Balance Sheet Risk

At December 31, 2000, the Company was contingently liable with respect to approximately $42,077,000 ($33,447,000 at December31, 1999) of standby letters of credit (“letters”) issued in connection with the delivery, installation and performance of the Company’sproducts under contracts with customers throughout the world. Of the outstanding total, approximately 76% relates to Cameron. TheCompany was also liable for approximately $13,169,000 of bank guarantees and letters of credit used to secure certain financial oblig-ations of the Company ($24,991,000 at December 31, 1999). While certain of the letters do not have a fixed expiration date, the major-ity expire within the next one to two years and the Company would expect to issue new or extend existing letters in the normal courseof business.

Except for certain financial instruments as described below, the Company’s other off-balance sheet risks are not material.

Concentrations of Credit Risk

Apart from its normal exposure to its customers, who are predominantly in the energy industry, the Company had no signif-icant concentrations of credit risk at December 31, 2000.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, trade receivables, trade payables, debtinstruments, interest rate swap contracts and foreign currency forward contracts. The book values of cash and cash equivalents,trade receivables and trade payables and floating-rate debt instruments are considered to be representative of their respective fairvalues. Based on the spread between the contract forward rate and the spot rate as of year-end on contracts with similar terms toexisting contracts, the fair value associated with the Company’s foreign currency forward contracts was approximately $213,000higher than nominal value at December 31, 2000.

Note 15: Summary of Noncash Investing and Financing Activities

Increase in net assets:Years Ended December 31,


Common stock issued for employee stock ownership andother plans $ 3,954 $ 7,425

Tax benefit of certain employee stock benefit plan transactions 59,624 5,693Other — 534

Note 16: Earnings Per Share

The weighted average number of common shares (utilized for basic earnings per share presentation) and common stock equivalents outstanding for each period presented was as follows:


(amounts in thousands) 2000 1999 1998

Average shares outstanding 52,800 53,328 52,857Common stock equivalents 2,213 1,520 2,045

Shares utilized in diluted earnings per share presentation 55,013 54,848 54,902

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Note 17: Accumulated Other Elements of Comprehensive Income

December 31,


Accumulated foreign currency translation loss $ (36,964) $ (11,651)Accumulated adjustments to record minimum

pension liabilities (388) (388)Other 247 —

$ (37,105) $ (12,039)

Note 18: Unaudited Quarterly Operating Results

2000 (by quarter) 3

(dollars in thousands, except per share data) 1 2 3 4

Revenues 1 $338,302 $349,993 $349,978 $348,436Gross margin 2 97,664 103,156 103,285 107,807Net income (loss) 12,665 16,197 8,352 (9,554)Earnings (loss) per share:

Basic .25 .31 .16 (.18)Diluted .24 .29 .15 (.18)

1999 (by quarter) 3

(dollars in thousands, except per share data) 1 2 3 4

Revenues 1 $385,776 $387,990 $376,860 $324,435Gross margin 2 103,921 99,268 98,751 96,845Net income 10,762 9,129 15,928 7,183Earnings per share:

Basic .20 .17 .30 .14Diluted .20 .17 .29 .13

1 Revised to include shipping and handling costs as an item in cost of sales rather than a reduction in revenues.2 Gross margin equals revenues less cost of sales before depreciation and amortization.3 See Note 2 of the Notes to Consolidated Financial Statements for further information relating to nonrecurring/unusual charges

incurred during 2000 and 1999.

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SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA OF COOPER CAMERON CORPORATION

The following table sets forth selected historical financial data for the Company for each of the five years in the period endedDecember 31, 2000. This information should be read in conjunction with the consolidated financial statements of the Company andnotes thereto included elsewhere in this Annual Report.


(dollars in thousands, except per share) 2000 1999 1998 1997 1996

Income Statement Data:Revenues 1 $ 1,386,709 $ 1,475,061 $ 1,893,311 $ 1,817,132 $ 1,395,223

Costs and expenses:Cost of sales (exclusive of

depreciation and amortization) 1 974,797 1,076,276 1,340,722 1,307,970 1,017,594Depreciation and amortization 75,321 83,716 72,474 65,862 62,480Selling and administrative expenses 197,381 205,734 229,710 215,331 194,983Interest expense 18,038 27,834 32,721 28,591 20,878Nonrecurring/unusual charges 2 77,399 10,585 21,956 — 7,274

1,342,936 1,404,145 1,697,583 1,617,754 1,303,209

Income before income taxes 43,773 70,916 195,728 199,378 92,014Income tax provision (16,113) (27,914) (59,572) (58,796) (27,830)

Net income $ 27,660 $ 43,002 $ 136,156 $ 140,582 $ 64,184

Earnings per share:Basic $ .52 $ .81 $ 2.58 $ 2.70 $ 1.27Diluted $ .50 $ .78 $ 2.48 $ 2.53 $ 1.21

Balance Sheet Data (at the end ofperiod):

Total assets $ 1,493,873 $ 1,470,719 $ 1,823,603 $ 1,643,230 $ 1,468,922Stockholders’ equity 842,279 714,078 780,285 642,051 516,128Long-term debt 188,060 195,860 364,363 328,824 347,548Other long-term obligations 117,503 138,955 149,113 143,560 160,405

1 Revised to include shipping and handling costs as an item in cost of sales rather than a reduction in revenues.2 See Note 2 of the Notes to Consolidated Financial Statements for further information relating to the nonrecurring/unusual charges

incurred during 2000, 1999 and 1998. Information relating to the nonrecurring/unusual charges incurred during 1996 may befound in the 1996 Annual Report to Stockholders.

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STOCKHOLDER INFORMATION

Transfer Agent and Registrar

The First Chicago Trust Division of EquiServe

General correspondence about your shares should beaddressed to:

First Chicago Trust Company of New Yorkc/o EquiServeP.O. Box 2500Jersey City, N.J. 07303-2500

Website: www.equiserve.comE-mail: [email protected]

Telephone inquiries can be made to the TelephoneResponse Center at (201) 324-1225, Monday throughFriday, 8:30 a.m. to 7:00 p.m., Eastern Time.

Additional Stockholder Assistance

For additional assistance regarding your holdings, write to:

Corporate Secretary Cooper Cameron Corporation515 Post Oak Blvd, Suite 1200Houston, Texas 77027Telephone: (713) 513-3322

Annual Meeting

The Annual Meeting of Stockholders will be held at10:00 a.m., Thursday, May 10, 2001, at the OmniHouston Hotel in Houston, Texas. A meeting notice andproxy materials are being mailed to all stockholders ofrecord on March 14, 2001.

Stockholders of Record

The approximate number of holders of Cooper CameronCommon stock was 15,300 as of February 26, 2001. Thenumber of record holders as of the same date was 1,820.

Common Stock Prices

Cooper Cameron Common stock is listed on the NewYork Stock Exchange under the symbol CAM. (Thesymbol was changed from “RON” to “CAM” on March1, 1999.) The trading activity during 2000 and 1999 wasas follows:

High Low Last2000First Quarter 71 7/8 42 3/8 66 7/8

Second Quarter 83 9/16 60 9/16 66Third Quarter 83 7/8 58 5/8 73 11/16

Fourth Quarter 77 15/16 52 5/16 66 1/16

High Low Last1999First Quarter 35 7/8 22 1/4 33 7/8

Second Quarter 41 5/16 27 3/4 37 1/16

Third Quarter 44 7/16 32 9/16 37 3/4

Fourth Quarter 50 33 9/16 48 15/16

Visit Cooper Cameron’s home page on the World Wide Web at www.coopercameron.com.

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Additional information about the Company is available on Cooper Cameron’s home page

at www.coopercameron.com.

C O O P E R C A M E R O N

Cooper Cameron is a leading international manufacturer of oil

and gas pressure control 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. Cooper Cameron is also a leading manufacturer of

centrifugal air compressors, integral gas compressors and turbochargers.

D I R E C T O R S

Sheldon R. EriksonChairman of the Board,President and ChiefExecutive Officer,Cooper CameronCorporationHouston, Texas

Nathan M. AveryInvestorHouston, Texas

C. Baker CunninghamChairman, President and Chief Executive Officer,Belden Inc.St. Louis, Missouri

Grant A. DoveManaging Partner,Technology Strategies & AlliancesDallas, Texas

Michael E. PatrickVice President and ChiefInvestment Officer,Meadows Foundation, Inc.Dallas, Texas

David Ross IIIInvestorHouston, Texas

Michael J. SebastianExecutive Vice President(retired),Cooper Industries, Inc.Houston, Texas

COOPER CAMERONCORPORATION

Sheldon R. EriksonChairman, President and Chief Executive Officer

Thomas R. HixSenior Vice President and Chief Financial Officer

R. Scott AmannVice President,Investor Relations

Joseph D. ChamberlainVice President and Corporate Controller

Jane L. CrowderVice President,Human Resources

William D. GivensVice President, Taxes

Michael C. JenningsVice President and Treasurer

William C. LemmerVice President, General Counseland Secretary

Cameron

Dalton L.ThomasPresident‡

Steven P. BeattyVice President, Finance

Steve E. EnglishVice President, CAMSERV

Hal J. GoldieVice President and GeneralManager, Eastern Hemisphere

Hunter W. JonesVice President, Quality andGlobal Procurement

Jack B. MooreVice President and GeneralManager, Western Hemisphere

J. Gilbert NanceVice President,Drilling Business

Erik PeyrerVice President and General Manager, Asia Pacificand Middle East

S. Joe VinsonVice President,Human Resources

Edward E.WillVice President, Surface andSubsea Business

Cameron Controls

Donald J. SchortgenVice President

Cameron Willis Chokes

Peter J. LangVice President

Cooper Cameron Valves

A. John ChapmanPresident‡

Harold E. Conway, Jr.Vice President, Operations

William B. FindlayVice President and General Manager, Europe,Africa, Middle East

David R. MeffordVice President, Engineering

T. Duane MorganPresident, Orbit Valve Company

Luis O. OrtizVice President, Global BusinessDevelopment

Richard A. SteansVice President, Finance

James E.WrightVice President, Marketing andNorth America Sales

Cooper Energy Services

Franklin MyersPresident*

Richard LeongVice President, Marketing and Sales, Reciprocating

Robert D. MillerVice President, Sourcing and Productivity Operation

Floyd C.TinneyVice President, Finance

Cooper TurbocompressorRobert J. RajeskiPresident‡

Jeffrey G. AltamariVice President, Finance

Frank H. AthearnVice President,Sales and Marketing

John C. BartosVice President, Engineering

‡ Also, Vice President,Cooper Cameron Corporation

* Also, Senior Vice President,Cooper Cameron Corporation

O F F I C E R S

Where Tradition and Technology

Come Together

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S u i t e 1 2 0 0

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2 0 0 0

W h e r e T r a d i t i o n a n d T e c h n o l o g y C o m e T o g e t h e r

ccc_2000ar

Economy & Finance

oil valves

gas drilling

cooper cameron valves

process valves

drilling contractors

butterfly valves

industrialorbit valves

bleed valves