Cameron International Corp. Reports Operating Results (10-Q)
Cameron International Corporation has a market cap of $12.76 billion; its shares were traded at around $51.58 with a P/E ratio of 18.3 and P/S ratio of 1.8. Cameron International Corporation had an annual average earning growth of 20.5% over the past 10 years. GuruFocus rated Cameron International Corporation the business predictability rank of 3-star.
Highlight of Business Operations:Total revenues for the Company increased by $615.7 million, or 19.0%, during the six months ended June 30, 2012 as compared to the six months ended June 30, 2011. Almost 40% of the revenue increase resulted from businesses acquired over the last 12 months with the remaining increase reflecting higher sales levels in the existing operations of the Company s DPS and V&M business segments. Sales in the DPS, V&M and PCS segments are discussed in more detail below.
Selling and administrative expenses increased $77.3 million, or 16.1%, during the six months ended June 30, 2012 as compared to the six months ended June 30, 2011. As a percent of revenues, selling and administrative expenses decreased from 14.8% during the first half of 2011 to 14.5% for the first half of 2012. Over 90% of the dollar increase was due to (i) higher employee-related costs due to headcount increases, higher incentive compensation and travel, as well as (ii) higher facility costs, resulting largely from aftermarket and international expansion activities and the impact of newly acquired businesses.
improved market conditions in North America, particularly in unconventional resource areas, which resulted in a 40% increase in sales of distributed valves and a 23% increase in measurement equipment sales during the six months ended June 30, 2012, as compared to the same period in 2011, and
an increase in sales of engineered and process valves of 46% and 38%, respectively as compared to the same period in 2011, due to higher North American and Asia Pacific activity levels, combined with higher beginning-of-period backlog levels.
Cameron is a significant participant in the subsea systems projects market. This market is significantly different from most of the Company s other markets since subsea systems projects are significantly larger in scope and complexity, in terms of both technical and logistical requirements. Subsea projects (i) typically involve long lead times, (ii) typically are larger in financial scope, (iii) typically require substantial engineering resources to meet the technical requirements of the project and (iv) often involve the application of existing technology to new environments and, in some cases, may require the development of new technology. The Company s subsea business unit received orders in the amount of $1.2 billion during the first six months ended June 30, 2012. Total backlog for the subsea business unit at June 30, 2012 was approximately $2.3 billion. To the extent the Company experiences unplanned difficulties in meeting the technical and/or delivery requirements of the projects, the Company s earnings or liquidity could be negatively impacted. The Company accounts for its subsea projects, as it does its separation and drilling projects, using accounting rules for construction-type and production-type contracts. In accordance with this guidance, the Company estimates the expected margin on these projects and recognizes this margin as units are completed. Factors that may affect future project costs and margins include the ability to properly execute the engineering and design phases consistent with our customers expectations, production efficiencies obtained, and the availability and costs of labor, materials and subcomponents. These factors can significantly impact the accuracy of the Company s estimates and materially impact the Company s future period earnings. If the Company experiences cost overruns, the expected margin could decline. Were this to occur, in accordance with the accounting guidance, the Company would record a cumulative adjustment to reduce the margin previously recorded on the related project in the period a change in estimate is determined. As an example, the Company incurred a $51.0 million charge in the first quarter of 2011 for cost overruns on a large subsea project in Nigeria. Large subsea systems projects accounted for approximately 11.2% of total revenues for the six-month period ended June 30, 2012 and represent a significant portion of the subsea business unit s total operations. As of June 30, 2012, the Company had a subsea systems project backlog of approximately $1.6 billion.
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