/ / 20 14 ANNUAL REPORT 1333 WEST LOOP SOUTH, SUITE 1700 HOUSTON, TEXAS 77027 713.513.3300 WWW.C-A-M.COM OFFICERS JACK B. JACK B. MOORE Chairman Chairman and Chief Executive Officer Houston, R. SCOTT ROWE C. BAKER President and Chief Operating Officer // CAMERON Former GARY M. HALVERSON Belden Inc. INTERNATIONAL Senior Vice President and President, Drilling & Production Systems St. Louis, CORPORATION WILLIAM C. LEMMER H. Senior Vice President and General Counsel Former OVERVIEW CDI CHARLES M. SLEDGE Cameron engineers, designs, and Philadelphia, Pennsylvania Senior Vice President and Chief Financial Officer manufactures value-driven solutions SHELDON R. ERIKSON DENNIS S. BALDWIN for the global oil and gas industry. Former Chairman of the Board Vice President, Controller and Chief Accounting Officer Cameron Leveraging its global Houston, Texas MIKE GARDING manufacturing, engineering, Chief Executive Officer, OneSubsea and sales and service network, PETER J. FLUOR Chairman of the Board and Chief Executive Officer STEVEN P. GEIGER Cameron works with oil and gas Texas Crude Energy, LLC Vice President and Chief Administrative Officer producers, drilling contractors, oil Houston, Texas GRACE B. HOLMES & pipeline operators, refiners and Vice President, Corporate Secretary and Chief Governance Officer other process owners to control, DOUGLAS L. FOSHEE Former Chairman, President and Chief Executive Officer direct, adjust, process, measure H. KEITH JENNINGS and compress pressures and flows. El Paso Corporation Vice President and Treasurer Houston, Texas W. SCOTT LAMB Cameron operates globally from JAMES T. HACKETT Vice President, Investor Relations more than 300 locations covering Former Executive Chairman of the Board virtually all of the world’s oil and Anadarko Petroleum Corporation DOUGLAS E. MEIKLE gas operating basins. The majority Houston, Texas Vice President and President, Valves and Measurement of its business comes from outside RODOLFO LANDIM STEVEN W. ROLL the United States. Controlling Partner and Managing Director Vice President and President, Process Systems Mare Investimentos S.A. EDWARD E. WILL Partner and Chief Executive Officer Vice President, Strategy Ouro Preto Oleo e Gas Rio de Janeiro, Brazil Former Leadership Positions Petroleo Brasileiro S.A., a wholly-owned subsidiary of Petrobras MICHAEL E. PATRICK Former Vice President and Chief Investment Officer Meadows Foundation, Inc. Dallas, Texas JON ERIK REINHARDSEN President and Chief Executive Officer Petroleum Geo-Services ASA Lysaker, Norway R. SCOTT ROWE President and Chief Operating Officer Houston, Texas BRENT J. SMOLIK Chairman of the Board, President and Chief Executive Officer EP Energy Corporation Houston, Texas BRUCE W. WILKINSON Former Chairman, President and Chief Executive Officer McDermott International, Inc. Designed by Origin, Houston, TX Houston, Texas ORIGINACTION.COM / / TO OU R SHAR EHOL DER S Cameron reported record-setting financial results for 2014 due to solid operating performance in each of the Company’s businesses, particularly our Drilling segment, which led the way with a 52 percent increase in operating income versus the prior year. However, the sharp decline in energy prices in late 2014 and early 2015 served notice that our industry is once again facing a cyclical downturn that will have a negative impact on all of our business segments. The only predictable thing about such cycles is their unpredictability. We don’t know when oil prices will recover. Nevertheless, as we have demonstrated in the past, Cameron is particularly adept at weathering cyclical downturns. We do this by remaining focused on the things we can control: staying very close to our customers to ensure that we are advancing and investing in the most cost-effective solutions for their operations; not compromising on our commitment to service and execution excellence; and aggressively managing our cost structure to the realities of our markets. We will also leverage the breadth of our product, customer and geographic diversity to provide some cushion against the impact from weak demand. 2014 FINANCIAL AND OPERATING HIGHLIGHTS Despite the decline in oil prices late in the year, Cameron achieved a number of important objectives, including: Making significant operational and financial Continuing to book major, multi-year contracts improvement within our Drilling segment, which with our clients. The two most notable awards were ended the year with a more than 800-basis point with ExxonMobil and Pemex. ExxonMobil (Canada) margin improvement from the first quarter to awarded Cameron a multi-year contract for wellhead the fourth quarter of 2014. More importantly, we equipment and production trees for the Hebron achieved a level of predictability that will enable us project, a 52-well development located offshore to continue to drive efficiencies in the execution of Newfoundland. Pemex awarded OneSubsea a subsea our backlog. production systems contract totaling more than $270 million for the Lakach deepwater project offshore Entering into a subsea services alliance agreement, Mexico, the first such deepwater subsea field to be through OneSubseaTM, with Helix and Schlumberger, developed by Pemex. to develop technologies and deliver solutions that optimize the value-chain of well intervention Continuing to develop and commercialize advanced systems. The alliance will deliver simpler, more technology solutions for our customers. Specifically, cost-effective, efficient intervention systems we received another order from Freeport-McMoRan through a single, collaborative approach. Oil & Gas to supply a 25,000 psi blowout preventer stack and 25,000 psi manifold. Cameron delivered the Completing the divestiture of our compression industry’s first and only 13-5/8” 25,000 psi blowout businesses, for gross proceeds of $1.4 billion. These preventer to Freeport-McMoRan in 2011. In total, businesses had been solid performers for us, but they Cameron has now sold four 20,000-plus psi blowout were outside of our core focus, and we made the preventers, establishing ourselves as the proven determination that Cameron was not the natural leader in the emerging ultra high-pressure market. owner of these assets. Strengthening and realigning our senior management Making tremendous progress on our safety record. team, specifically with the appointment of a new Specifically, we ended the year with the lowest President and Chief Operating officer, Scott Rowe. TRIR (Total Recordable Incident Rate) and LTIR Scott is a 13-year Cameron veteran who brings a (Lost Time Incident Rate) in the history of wealth of leadership experience and a proven track the Company. record of delivering results within Cameron. In addition, we installed new leadership in 2014 at OneSubsea, at our Valves & Measurement business and our Process Systems business -- and we recruited a new executive officer in charge of marketing and technology. I firmly believe we have a focused leadership team that is prepared to meet the current market challenges while remaining committed to long-term value creation for Cameron’s stakeholders. // WE ARE HIGHLY CONFIDENT IN THE SUSTAINED LONG-TERM GROWTH IN GLOBAL ENERGY DEMAND. CHAIRMAN AND CHIEF EXECUTIVE OFFICER JACK MOORE (LEFT) WITH PRESIDENT AND CHIEF OPERATING OFFICER SCOTT ROWE LOOKING AHEAD We are fortunate to have a substantial backlog of As we look beyond the current weakness in the market, work that provides us with good visibility into a portion we are highly confident in the sustained long-term growth of our revenues and operating income in 2015. And in global energy demand. The reduced activity levels we our performance in 2014 gives us a high degree of are currently witnessing on a global scale will result in confidence in our ability to deliver that backlog in lower oil production levels as a result of natural decline accordance with planned timeframes and expected rates. Lower energy costs will spur incremental demand margin performance. and a corresponding correction in pricing over time. Again, while we do not control the timing of such macro However, due to the sharp decline in oil prices, many of events, we will remain focused on those aspects of our our customers are taking steps to reduce their expected business we do control. capital spending plans in 2015. Not surprisingly, this has resulted in the deferral of new projects and can significantly In closing, I want to thank the employees of Cameron for impact our shorter-cycle businesses. In some instances, their dedicated service and outstanding performance in it can also impact existing projects, specifically when 2014 and their continuing engagement and commitment customers seek ways of reducing the cost of servicing or in 2015. Cameron is a great company that has a rich history completing those projects. of performing through challenging market environments while holding true to the core values that guide us each You can expect that Cameron will work closely with and every day to be the best at what we do. our customers to support their efforts to improve their operating efficiencies and lower their costs during this economic environment. We will also leverage every aspect of our enterprise to expand our share position. Sincerely, It’s this competitive drive that will help us weather this cycle and emerge as an even more formidable supplier to our customers. JACK B. MOORE Chairman and Chief Executive Officer / / FINANCIAL HIGHLIGHTS YEAR ENDED DECEMBER 31, (in millions except per share) 2014 2013 2012 Revenues $ 10,381 $ 9,138 $ 7,795 Income from continuing operations before income taxes 1,080 855 842 Income from continuing operations as a percent of revenue 10.4% 9.4% 10.8% Fully diluted earnings per share from continuing operations excluding other costs 4.14 2.89 2.87 Shares used in calculations of diluted earnings per share 205 244 248 Capital expenditures 385 520 427 Net cash provided by operating activities 1,193 838 683 Cash, cash equivalents and short-term investments 1,626 1,854 1,703 YEAR ENDED DECEMBER 31, (in millions except employees) 2014 2013 2012 Working capital* $ 3,283 $ 3,909 $ 3,742 Investment in share repurchase 1,747 1,531 21 Shares outstanding 195 221 247 Orders 9,376 11,666 10,184 Backlog 9,536 11,079 8,119 Number of employees 28,000 29,000 27,000 *Current assets minus current liabilities FULLY DILUTED NET CASH PROVIDED BY EARNINGS PER SHARE REVENUES OPERATING ACTIVITIES WORKING CAPITAL FROM CONTINUING OPERATIONS, EXCLUDING OTHER COSTS $ MILLIONS $ MILLIONS $ MILLIONS 12,000 1,200 4,000 $4.50 11,000 1,100 3,500 10,000 1,000 9,000 900 3,000 8,000 800 $3.50 2,500 7,000 700 6,000 600 2,000 5,000 500 1,500 4,000 400 $2.50 3,000 300 1,000 2,000 200 500 1,000 100 0 0 0 $1.50 ‘14 ‘13 ‘12 ‘14 ‘13 ‘12 ‘14 ‘13 ‘12 ‘14 ‘13 ‘12 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (cid:1799)(cid:1799)(cid:1799)(cid:1799)ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014 OR (cid:1798)(cid:1798)(cid:1798)(cid:1798)TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-13884 CAMERON INTERNATIONAL CORPORATION (Exact name of Registrant as specified in its charter) Delaware 76-0451843 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 1333 West Loop South Suite 1700 Houston, Texas 77027 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code (713) 513-3300 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: Title of Each Class Name of Each Exchange on Which Registered Common Stock, Par Value $0.01 Per Share New York Stock Exchange Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes(cid:53) No(cid:133) Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes(cid:133) No(cid:53) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes(cid:53) No(cid:133) Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes(cid:53) No(cid:133) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.(cid:133) Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”,“accelerated filer”and“smaller reporting company”in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer (cid:53) Accelerated filer (cid:133) Non-accelerated filer (cid:133)(Do not check if a smaller reporting company) Smaller reporting company (cid:133) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes(cid:133) No(cid:53) The aggregate market value of the Common Stock, par value $0.01 per share, held by non-affiliates of the registrant as of June 30, 2014, our most recently completed second fiscal quarter, was approximately $10,963,201,206. For purposes of the determination of the above statement amount only, all the directors and executive officers of the registrant are presumed to be affiliates. The number of shares of Common Stock, par value $.01 per share, outstanding as of February 10, 2015 was 193,721,697. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s 2015 Proxy Statement for the Annual Meeting of Stockholders to be held May 8, 2015 are incorporated by reference into Part III. TABLE OF CONTENTS ITEM PAGE PART I Glossary of Terms 3 1. Business 4 Markets and Products 5 Market Issues 7 New Product Development 8 Competition 10 Manufacturing 10 Backlog 10 Patents, Trademarks and Other Intellectual Property 10 Employees 11 Executive Officers of the Registrant 12 1A. Risk Factors 13 1B. Unresolved Staff Comments 18 2. Properties 18 3. Legal Proceedings 19 4. Mine Safety Disclosures 21 PART II 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 21 6. Selected Financial Data 22 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 23 7A. Quantitative and Qualitative Disclosures about Market Risk 42 8. Financial Statements and Supplementary Data 44 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 84 9A. Controls and Procedures 84 9B. Other Information 84 PART III 10. Directors, Executive Officers and Corporate Governance 84 11. Executive Compensation 85 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 85 13. Certain Relationships and Related Transactions, and Director Independence 85 14. Principal Accounting Fees and Services 85 PART IV 15. Exhibits, Financial Statement Schedules 85 Signatures 94 2 PART I GLOSSARY OF TERMS Actuator. A hydraulic or electric motor used to open or close valves. Blowout Preventer or BOP. A hydraulically operated system of safety valves installed at the wellhead during drilling and completion operations for the purpose of preventing an increase of high-pressure formation fluids —oil, gas or water —in the wellbore from turning into a “blowout”of the well. BOP stack. A set of two or more BOPs used to ensure pressure control of a well. A typical stack configuration has the ram BOPs on the bottom and the annular BOPs at the top. Ram BOPs consist of two halves of a cover known as ram blocks that are forced together by hydraulic cylinders to seal the wellbore, in some cases by shearing through the drillpipe. Annular BOPs contain a sealing element which resembles a large rubber doughnut that is mechanically squeezed inward to seal on either the drillpipe, casing or the open hole. Casing. Large-diameter pipe lowered into an open hole and cemented in place. Choke. A type of valve used to control the rate and pressure of the flow of production from a well or through flowlines. Christmas tree. An assembly of valves, pipes and fittings used to control the flow of oil and gas from a well. Controls. A device which allows the remote triggering of an actuator to open or close a valve. Drawworks. The machine on the rig consisting of a large-diameter steel spool, brakes, a power source and assorted auxiliary devices. The primary function of the drawworks is to reel out and reel in the drilling line, a large diameter wire rope, in a controlled fashion. Drilling stack. A vertical arrangement of blowout prevention equipment installed at the top of the casing at a wellhead to provide maximum pressure integrity in the event of a well control incident for drilling and completion operations. Elastomer. A rubberized pressure control sealing element used in drilling and wellhead applications. Manifold. An arrangement of piping or valves designed to control, distribute and often monitor fluid flow. Reservoir. A subsurface body of rock having sufficient porosity and permeability to store and transmit fluids. Riser. Pipe used to connect the wellbore of offshore wells to drilling or production equipment on the surface, and through which drilling fluids or hydrocarbons travel. Semisubmersible. A particular type of floating vessel that is supported primarily on large pontoon-like structures submerged below the sea surface. Subsea tree. An assembly of valves, actuators and ancillary equipment connected to the top of the casing of a well located on the sea floor to direct and control the flow of oil and gas from the well. Topdrive. A device that turns the drillstring. Valve. A device used to control the rate of flow in a line, to open or shut off a line completely, or to serve as an automatic or semi-automatic safety device. Wellhead. The equipment installed at the surface of a wellbore to maintain control of a well and including equipment such as the casing head, tubing head and Christmas tree. 3 ITEM 1. BUSINESS Cameron International Corporation (Cameron or the Company) provides flow equipment products, systems and services to worldwide oil and gas industries through four business segments–Subsea, Surface, Drilling and Valves & Measurement (V&M). For additional business segment information for each of the three years in the period ended December 31, 2014, see Note 16 of the Notes to Consolidated Financial Statements, which Notes are included in Part II, Item 8 of this Annual Report on Form 10-K. In 1920, Jim Abercrombie, Ed Lorehn, Harry Cameron and several other partners incorporated an oilfield repair shop in Houston, Texas under the name Cameron Iron Works (CIW). Abercrombie subsequently invented and CIW manufactured the industry’s first blowout preventer for use in oil and gas well drilling. CIW grew rapidly due to sales of blowout preventers and other oilfield equipment. In the early 1940’s, CIW entered the market for defense-related equipment becoming a major supplier of anti-submarine and other naval armaments to the U.S. Navy. CIW also became a leading supplier of forged metal products for both defense and oilfield applications replacing less durable cast metal components of the day. CIW subsequently expanded into various other flow control, valve and pressure control equipment businesses acquiring Joy Petroleum Equipment and McEvoy-Willis wellhead equipment prior to its acquisition by Cooper Industries, Inc. in 1989. Cameron was incorporated in its current form as a Delaware corporation on November 10, 1994, when Cooper Industries transferred all of the assets and liabilities of its Petroleum and Industrial Equipment segment into this new entity. Following this, the Company operated as a wholly-owned subsidiary of Cooper Industries from 1994 until June 30, 1995, when it was spun-off as a separate stand-alone company and renamed Cooper Cameron Corporation. The Company subsequently changed its name to Cameron International Corporation in May 2006. Since becoming a stand-alone company, Cameron has made numerous acquisitions, including the 1996 acquisition of Ingram Cactus Company, the 1998 acquisition of Orbit Valve International, Inc., 2004’s acquisition of Petreco International, Inc., the purchase of substantially all of the businesses within the Flow Control segment of Dresser, Inc. in 2005, the acquisition of NATCO Group Inc. (NATCO) in 2009, the purchase of LeTourneau Technologies Drilling Systems, Inc. in 2011 and the acquisition of the TTS Energy Division from TTS Group, ASA in 2012. In 2013, Cameron and Schlumberger Limited joined together to form OneSubsea™, a venture established to manufacture and develop products, systems and services for the subsea oil and gas market. Cameron is a 60% owner and manager of OneSubsea. Cameron has also sold various operations during the time it has been a stand-alone company, including its Reciprocating Compression business in June 2014 and its Centrifugal Compression business, which closed effective January 1, 2015. Today, Cameron is a Fortune 500 company with annual revenues of more than $10 billion and a workforce of over 28,000 employees. Cameron also has legal entities in more than 50 countries worldwide. The common stock of Cameron trades on the New York Stock Exchange under the symbol “CAM”. The Company’s Internet address is www.c-a-m.com. General information about Cameron, including its Corporate Governance Principles, charters for the committees of the Company’s board of directors, Code of Conduct, and Codes of Ethics for Management Personnel, including Senior Financial Officers, and Directors, can be found in the Governance and Compliance sections of the Company’s website. The Company makes available on its website its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended (the Exchange Act) as soon as reasonably practicable after the Company electronically files or furnishes them to the United States Securities and Exchange Commission (the SEC). Information filed by the Company with the SEC is also available at www.sec.gov or may be read and copied at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. Information regarding operations of the Public Reference Room may be obtained by calling the SEC at 1- 800-SEC-0330. Any reference to Cameron, its segments or other businesses within this Form 10-K as being a leader, leading provider, leading manufacturer, or having a leading position is based on the amount of equipment installed worldwide and available industry data. 4