SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

For the Quarterly Period Ended March 31, 2005

OR

Commission File Number 1-13884

Cooper Cameron Corporation

713/513-3300
(Registrant’s Telephone Number, Including Area Code)

N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by 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.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Number of shares outstanding of issuer’s common stock as of April 25, 2005 was 54,933,658.

TABLE OF CONTENTS

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

COOPER CAMERON CORPORATION

The accompanying notes are an integral part of these statements.

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COOPER CAMERON CORPORATION

The accompanying notes are an integral part of these statements.

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COOPER CAMERON CORPORATION

The accompanying notes are an integral part of these statements.

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COOPER CAMERON CORPORATION

Note 1: Basis of Presentation

     The accompanying Unaudited Consolidated Condensed Financial Statements of Cooper Cameron Corporation (the Company) have been prepared in accordance with Rule 10-01 of Regulation S-X and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Those adjustments, consisting of normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the financial information for the interim periods, have been made. The results of operations for such interim periods are not necessarily indicative of the results of operations for a full year. The Unaudited Consolidated Condensed Financial Statements should be read in conjunction with the Audited Consolidated Financial Statements and Notes thereto filed by the Company on Form 10-K for the year ended December 31, 2004.

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates include estimated losses on accounts receivable, estimated warranty costs, estimated realizable value on excess or obsolete inventory, contingencies (including legal and tax matters), estimated liabilities for liquidated damages, estimates related to pension accounting and estimates related to deferred tax assets. Actual results could differ materially from these estimates.

Note 2: Stock-Based Compensation

     As described more fully in the Company’s Annual Report on Form 10-K referred to above, the Company measures compensation expense for its stock-based compensation plans using the intrinsic value method. The following table illustrates the pro forma effect on net income and earnings per share if the Company had used the alternative fair value method to recognize stock-based employee compensation expense. The components of pro forma net income were as follows (in thousands, except per share data):

     In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payments (SFAS 123R). SFAS 123R requires all share-based payments to employees, including grants to employee stock options, to be recognized over their vesting periods in the income statement based on their estimated fair values. In April 2005, the Securities and Exchange Commission (SEC) issued a press release announcing it would provide for a phased-in implementation process for SFAS 123R. SFAS 123R is effective for all public entities in the first annual reporting period beginning after June 15, 2005 which, for the Company, would be 2006. As a result of the SEC’s announcement, the Company is in the process of reassessing the impact of SFAS 123R and has not determined whether it will early adopt SFAS 123R or defer adoption until 2006.

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Note 3: Acquisitions

     On January 28, 2005, the Company acquired one hundred percent of the outstanding stock of Ed’s Wellhead Supply (1999) Ltd. (EWS), a wellhead business located in Canada, for approximately $2,200,000, EWS’s results are included in the Company’s consolidated financial statements for the period subsequent to the acquisition date. A preliminary purchase price allocation for the EWS acquisition resulted in goodwill of approximately $228,000 at March 31, 2005, the majority of which will be deductible for income tax purposes. The purchase price allocation is subject to adjustment, as the Company is awaiting additional information relating to the fair value of EWS’s assets and liabilities.

     On November 29, 2004, the Company acquired certain businesses of the PCC Flow Technologies segment of Precision Castparts Corp. (PCC), for approximately $79,668,000, net of cash acquired and debt assumed, subject to adjustment based upon the actual net assets of the businesses at the acquisition date. The operations acquired serve customers in the surface oil and gas production, pipeline, and process markets. The results of the PCC entities acquired are included in the Company’s consolidated financial statements for the period subsequent to the acquisition date. A preliminary purchase price allocation for the PCC Acquisition resulted in goodwill of approximately $10,785,000 at March 31, 2005, the majority of which will not be deductible for income tax purposes. The purchase price allocation is subject to adjustment, as the Company is awaiting additional information relating to the fair value of the PCC entities’ assets and liabilities.

     On July 2, 2004, the Company acquired the assets of Unicel, Inc. (Unicel), a Louisiana-based supplier of oil separation products, for approximately $6,700,000 in cash and a note payable for $500,000. The Unicel acquisition expanded the product offering of Petreco International Inc. (Petreco), acquired earlier in 2004. Unicel’s results are included in the Company’s consolidated financial statements for the period subsequent to the acquisition date. The acquisition resulted in goodwill of approximately $5,702,000 at March 31, 2005, all of which should be deductible for income tax purposes.

     On February 27, 2004, the Company acquired one hundred percent of the outstanding stock of Petreco, a Houston-based supplier of oil and gas separation products, for approximately $89,922,000, net of cash acquired and debt assumed. Petreco provides highly engineered, custom processing products to the oil and gas industry worldwide and provides the Company with additional product offerings that are complementary to its existing products. Petreco’s results are included in the Company’s consolidated financial statements for the period subsequent to the acquisition date. The acquisition resulted in goodwill of $75,732,000 at March 31, 2005, none of which will be deductible for income tax purposes.

Note 4: Receivables

     Receivables consisted of the following (in thousands):

Note 5: Inventories

     Inventories consisted of the following (in thousands):

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Note 6: Plant and Equipment and Goodwill

     Plant and equipment consisted of the following (in thousands):

     Net goodwill consisted of the following (in thousands):

Note 7: Accounts Payable and Accrued Liabilities

     Accounts payable and accrued liabilities consisted of the following (in thousands):

     Activity during the three months ended March 31, 2005 associated with the Company’s product warranty accruals was as follows (in thousands):

Note 8: Employee Benefit Plans

     Total net benefit expense associated with the Company’s defined benefit pension and postretirement benefit plans consisted of the following for the three months ended March 31, 2005 and 2004 (in thousands):

     In May 2004, the FASB issued FASB Staff Position No. 106-2 (FSP 106-2), “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003” (the “Act”). FSP 106-2 provides accounting and reporting guidance for plans for companies who have concluded that prescription drug benefits by their plan(s) are actuarially equivalent to Medicare Part D under the Act and therefore believe the plan(s) are entitled to receive the subsidy available under the Act. The Company’s actuaries have concluded that the Company’s plan will be eligible for the subsidy. Therefore, the estimated subsidy has been reflected as a reduction in the accumulated postretirement benefit obligation at December 31, 2004 in the amount of $3,667,000. The effect of the subsidy on the measurement of net periodic postretirement benefit costs for the three months ended March 31, 2005 was a decrease of $152,300.

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Note 9: Business Segments

     The Company’s operations are organized into three separate business segments – Cameron, Cooper Cameron Valves (CCV) and Cooper Compression. Summary financial data by segment is as follows (in thousands):

     Corporate & other includes expenses associated with the Company’s Corporate office in Houston, Texas, as well as all of the Company’s interest income and interest expense.

Note 10: Earnings Per Share

     The calculation of diluted shares outstanding and net income used in computing diluted earnings per share is as follows (in thousands):

     During the three months ended March 31, 2005 and 2004, the number of basic and diluted shares outstanding were impacted by the following:

     The calculation of net income used in computing diluted earnings per common share is as follows (in thousands):

     For the three months ended March 31, 2004, diluted shares and net income used in computing diluted earnings per common share have been calculated using the if-converted method for the Company’s zero-coupon convertible debentures due 2021 and the 1.75%

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convertible debentures due 2021. For the three months ended March 31, 2005, the Company’s 1.5% convertible debentures due 2024 have not been included in the calculation of diluted earnings per share since the Company irrevocably elected to use the “cash pay” provision contained therein.

Note 11: Comprehensive Income

     The amounts of comprehensive income for the three months ended March 31, 2005 and 2004 were as follows (in thousands):

     The components of accumulated other elements of comprehensive income at March 31, 2005 and December 31, 2004 were as follows (in thousands):

Note 12: Contingencies

     The Company is subject to a number of contingencies which include environmental matters, litigation and tax contingencies.

Environmental Matters

     The Company’s worldwide operations are subject to domestic and international regulations with regard to air, soil and water quality as well as other environmental matters. The Company, through its environmental management system and active audit program, believes it is in substantial compliance with these regulations.

     Cooper Cameron has been identified as a potentially responsible party (“PRP”) with respect to four sites designated for cleanup under the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”) or similar state laws. The Company’s involvement at three of the sites is believed to be at a de minimis level. The fourth site is Osborne, Pennsylvania (a landfill into which the Cooper Compression operation in Grove City, Pennsylvania deposited waste), where remediation is complete and remaining costs relate to ongoing ground water treatment and monitoring. The Company is also engaged in site cleanup under the Voluntary Cleanup Plan of the Texas Commission on Environmental Quality at former manufacturing locations in Houston and Missouri City, Texas. Additionally, the Company has discontinued operations at a number of other sites which had previously been in existence for many years. The Company does not believe, based upon information currently available, that there are any material environmental liabilities existing at these locations. As of March 31, 2005, the Company’s consolidated financial statements include a liability balance of $7,100,000 for environmental matters.

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Legal Matters

     Cooper Cameron is a named defendant in two lawsuits regarding contaminated underground water in a residential area adjacent to a former manufacturing site of one of its predecessors. In Valice v. Cooper Cameron Corporation (80th Jud. Dist. Ct., Ha