Cooper Cameron Corporation Business Information, Profile, and History

Company Perspectives:

Our strategy is to aggressively and profitably expand and defend our position as an established market leader in our served markets through product leadership, focused attention, aggressive marketing, responsive service, and teamwork.

History of Cooper Cameron Corporation

Cooper Cameron Corporation operates as a leading manufacturer of oil and gas industrial equipment and services. Through its three main business segments--Cameron, Cooper Cameron Valves, and Cooper Compression--the company produces valves, wellheads, controls, chokes, and blowout preventers. The firm also provides assembled systems for oil and gas drilling as well as engines and compressors used in oil and gas production. Nearly two-thirds of company revenues stem from operations in over 115 countries around the globe.

Origins

In 1833, brothers Charles and Elias Cooper built a foundry in their hometown of Mount Vernon, Ohio, and called it the Mt. Vernon Iron Works. Soon known as the C. & E. Cooper Company, the firm's first products were plows, maple syrup kettles, hog troughs, sorghum grinders, and wagon boxes. Charles Cooper stood out as the lead figure in the company. Aggressively anti-slavery and a dedicated prohibitionist, he became a respected community leader even though many of his views differed greatly from those of his neighbors. When Elias Cooper died in 1848, Charles Cooper took on a succession of partners. With each new partner, the company name changed accordingly.

Mount Vernon was linked to the rest of the nation by railroad in 1851, and the following year Cooper was able to ship its first steam-powered compressors for blast furnaces. Cooper's relationship with the railroad, however, had its difficulties. When the Sandusky, Mansfield, and Newark Railway was delinquent in paying for woodburning locomotives from the company, Charles Cooper was driven to chain the wheels of a locomotive to the track, padlock it, and stand sentry until he was paid in full.

By the time of the Civil War, Cooper products included wood-burning steam locomotives and steam-powered blowing machines for charcoal blast furnaces. After Charles Gray Cooper--son of Elias--served in the Union Army and attended Rensselaer Institute, he became a partner with his uncle.

Post-Civil War Development

In 1869, Cooper became the first company in what was then the West to produce the new, highly efficient Corliss engine. Six years later, it offered the Cooper traction engine, America's first farm tractor. The company was incorporated as the C. & G. Cooper Company in 1895, and Frank L. Fairchild, a respected salesman of the Cooper-Corliss engine, was named its first president. Fairchild so enjoyed selling that throughout his 17-year presidency he continued to serve as sales manager.

By 1900, gas was being discovered in new fields and shipped more than 100 miles through primitive pipelines. At the same time, the oil industry was also beginning to develop. Not long after Charles Cooper's death in 1901, it became clear that steam turbine engines were destined to replace the Corliss engine. Cooper management recognized the necessity of focusing on a small segment of the market, and in 1900 it wisely chose to make a gradual change to natural-gas internal-combustion engines, which were being used successfully at the compression stage of pipeline transmission.

Fairchild died suddenly in 1912, and Charles Gray (C.G.) Cooper, took his place. One story describes C.G.'s famous bluntness particularly well: C.G. once visited a procrastinating client and without any preliminary niceties asked, "Do you want to buy a steam engine?" The man said he did not want one just then. "All right, then you can go to hell," C.G. said and stormed out abruptly.

Transitions Following World War I

During World War I, Cooper built high-speed steam-hydraulic forging presses for government arsenals, munitions plants, and shipyards, as well as giant gas engines and compressors and triple-expansion marine engines. The company's wartime production demands slowed its transformation from a producer of steam to gas engines, since steam engines were needed for the war effort. After the war, however, it became clear that the company's focus on developing gas internal-combustion engines would pay off. The old Corliss was quickly becoming outmoded by competition from steam turbines and gas-powered engines.

In 1919, C.G. Cooper became chairman and Desault B. Kirk, the company's treasurer, became president. Just a year later, Cooper began a long-range program for growth, and the directors elected Beatty B. Williams president. Although he had married the boss's daughter, few credited Williams's rise to simply marrying into the family. Serving as vice-president and general manager during the war years, Williams was single-minded in his dedication to the company's success and directed Cooper (and subsequently Cooper-Bessemer) with great energy and foresight for 22 years. Always mindful of what he called "an aloofness" that could develop between office and factory workers, Williams held conferences in which factory workers were invited to air their views and offered evening courses in production and management in which any employee could enroll.

By this time, natural gas was gaining importance in the manufacture of steel and glass and in the emerging petrochemical industry. Cooper field service engineers were often on hand for months at a time to oversee the installation of huge four-cycle Cooper engines and compressors in compressor stations as new pipelines were routed through West Virginia, Louisiana, Arkansas, Oklahoma, and Texas.

Within just a few years, Cooper became the country's leading producer of pipeline compression engines. Although Cooper also produced smaller two-cylinder engines used in natural-gas fields to extract gas as it came from the well, the Bessemer Gas Engine Company of Grove City, Pennsylvania, dominated that field.

Founded in 1899, Bessemer had produced oil-pumping engines for most of its existence and had invested heavily in diesel engine development during the 1920s. While Cooper and Bessemer had some product overlap, their major strengths were in different areas. By 1929, Cooper needed additional production facilities to meet the mounting orders for large natural-gas engine compressor units. Bessemer, after its lengthy period of diesel development, badly needed new capital. Both companies had posted nearly identical average earnings for the previous three years. The companies negotiated a merger for several months, and the Cooper-Bessemer Corporation came into being in April 1929. The merger made the company the largest builder of gas engines and compressors in the United States. Soon afterward it was listed on the American Stock Exchange.

Cooper-Bessemer's business boom was brief. The company continued the Bessemer line of diesel marine engines, and since most ships were built or converted on the East Coast, Cooper-Bessemer soon decided to open a sales office in New York. The office was opened on October 23, 1929, at the very beginning of the Great Depression.

Two years later, annual sales had dropped more than 90 percent, reflecting the almost total halt of construction on long-distance pipelines and in American shipyards. Half of all sales that year were for repair parts. Along with thousands of other American companies, Cooper-Bessemer was forced to lay off workers.

Cooper-Bessemer slowly revived in the middle and late 1930s by continuing to improve products and by entering new markets. The company was convinced that the diesel would replace steam-powered railroad engines, and it developed one for the new market. Charles B. Jahnke was elected president in 1940, and Williams moved to chairman of the board. When Jahnke died a year later, Williams returned to the presidency for two additional years.

World War II Production Spurs Growth

Only when Cooper-Bessemer embarked on a wartime production schedule in 1941 did its sales figures surpass their pre-Depression level. The company had sold engines to several branches of the military before the war and was thus in a favored position to receive large orders during World War II. It became a major producer of diesel engines for military vessels of all kinds and also increased production of locomotive engines. At the peak of its wartime production, Cooper-Bessemer had 4,337 employees working in round-the-clock shifts.

In 1941, Cooper-Bessemer's net sales jumped to an all-time high, and just two years later they had more than tripled. The company was listed for the first time on the New York Stock Exchange in 1944. Gordon Lefebvre was elected company president in 1943. He had previously served as vice-president and general manager. Formerly the head of General Motors's Pontiac division, he had a background in engineering and was energetic, likable, and a tough negotiator.

After World War II, Cooper-Bessemer became increasingly interested in selling its products worldwide. It formed an international sales office and announced its first sales-service branch outside the United States, in Caracas, Venezuela, in 1945. Later in the decade, it expanded warehouse facilities in Canada and established a subsidiary sales unit, Cooper-Bessemer of Canada, with three offices, and received its first postwar orders from the Soviet Union.

Cooper-Bessemer had developed its innovative "turbo flow" high-compression gas-diesel engine in 1945, and two years later it introduced the GMW engine, which delivered 2,500 horsepower and could be shipped in one assembled unit. In these postwar years, Cooper officials began to discuss diversification, which Lefebvre defined as "finding new markets for old products and new products for old markets, rather than moving into fields with which we are not familiar."

In 1951, Cooper-Bessemer's sales of $52 million surpassed its wartime high by nearly $10 million. Business that year was boosted by the Korean War; company shipments were almost solely to markets supported by the war effort, such as the petroleum, aluminum, chemical, and railroad industries.

Struggles and Expansion: 1950s to the Mid-1990s

A combination of internal and external circumstances in 1954 led to a startling 38 percent decrease in net sales and Cooper-Bessemer's first net loss since 1938. The company's problems included a seven-week strike at the Grove City plant and a nationwide recession, but the main difficulty was the U.S. Supreme Court's decision in the Phillips Petroleum case, which ruled that producers selling gas to interstate pipelines had to submit to the Federal Power Commission's jurisdiction. This decision produced upheaval and uncertainty among pipeline operators, including Cooper-Bessemer.

At the same time, the company was rebuffing a 1955 takeover attempt by a private investor named Robert New. During the process, Lefebvre resigned unexpectedly, and Lawrence Williams, Beatty Williams's son, became president. He served beside his father, who was chairman of the board. Lawrence Williams had already served the company in many capacities and had taken early retirement to pursue other interests; he considered his return a temporary one. The takeover attempt had shaken management. In an attempt to bring an infusion of young talent to the company, Williams made a number of top management changes, including elevating Eugene L. Miller to chief operating officer. Due to revitalized demand, sales bounced back in 1956 to a record high of $61.2 million, but it was becoming increasingly clear that Cooper-Bessemer needed to diversify in order to avoid the cyclical pitfalls of energy-related manufacturing.

In 1957, Gene Miller was elected president. At 38, he was the youngest man to hold the position since the company's original founder. Miller had begun at Cooper-Bessemer in 1946. A year after he became president, the company acquired Rotor Tool Company of Cleveland, the makers of pneumatic and high-cycle electric portable tools. Over the next few years, Cooper-Bessemer struggled to develop an engine to meet the challenge of General Electric's new combustion gas turbine engine, which threatened to supplant several of Cooper's engines in the pipeline transmission market. Its efforts resulted in the world's first industrial jet-powered gas turbine, introduced in 1960.

Under Miller's leadership, the distinction between Cooper-Bessemer administrative and operational management grew more pronounced, as was happening in companies throughout the country. Innovations such as computerization, fluctuations in worldwide monetary exchanges, increased government controls, and changing tax structures had made operating a large business increasingly complicated. In recognition of this, Miller moved the corporate offices from the Mount Vernon plant to offices on the city square to "establish a corporate group capable of administering many relatively independent divisions."

Meanwhile, Cooper-Bessemer's international division was also growing. By the end of the 1950s, Cooper had sales agents in ten countries, licensees in three, and franchises in two. In 1964, it opened an office in Beirut and also formed a wholly owned British subsidiary, Cooper-Bessemer (U.K.), Ltd.

Cooper-Bessemer was no exception to the trend toward large conglomerates during the 1960s, but it did try to limit its acquisitions to those that could be mutually beneficial. In the early 1960s, it acquired Kline Manufacturing, a producer of high-pressure hydraulic pumps; Ajax Iron Works, which built gas engine compressors and a water flood vertical pump for oil and gas production; and the Pennsylvania Pump and Compressor Company. Between 1960 and 1965, the company's sales grew from $68 million to $117 million.

By this time, Cooper had grown into a large, diverse company. To better reflect its nature, it changed its name to Cooper, Inc. in December 1965. Two years later, it moved its corporate headquarters to Houston in order to be more in the geographic mainstream of American business.

Cooper acquired Lufkin Rule Company of Saginaw, Michigan, in 1967. It was the first of many acquisitions for what Lufkin president William G. Rector called a "tool basket"--a high-quality hand tools manufacturing group. Subsequent hand tool-related acquisitions included Crescent Niagara Corporation (wrenches) in 1968, Weller Electric Corporation (soldering tools) in 1970, Nicholson File Company (rasps and files) in 1972, Xcelite (small tools for the electronics industry) in 1973, J. Wiss & Sons Company (scissors) in 1976, McDonough Company's Plumb Tool subsidiary (striking tools) in 1980, and Kirsch Company (drapery hardware) in 1981. Charles Cooper, the last Cooper family member to be associated with the company, retired in 1968. The grandson of Elias, he had served as a vice-president and board member.

The company branched out into aircraft services in 1970 by acquiring Dallas Airmotive, and later acquired Southwest Airmotive Company in 1973 and Standard Aircraft Equipment in 1975. While these acquisitions performed satisfactorily, the company sold its airmotive segment to Aviation Power Supply in 1981 because it did not see much potential for further growth. In 1973, the oil embargo threw many industrialized nations into an uproar. Cooper's Ajax division struggled to keep up with orders from domestic crude-oil producers and Cooper received a large order for its Coberra gas turbines for the Alaskan pipeline.

After having served as president and chief operating officer since 1973, Robert Cizik was named chief executive officer in 1975. Lured to the company from Standard Oil New Jersey in 1961, Cizik started his career at Cooper as executive assistant for corporate development. Under his leadership, the company stepped up its acquisition program. After satisfying a Justice Department challenge, Cooper acquired the White Superior engine division, a heavy-duty engine maker, from the White Motor Company in 1976. In 1979, Cooper realized a dream of acquiring the Dallas-based Gardner-Denver Company, a company roughly the same size as Cooper. Although Forbes described Gardner-Denver as "a company notorious for lack of planning or cost controls," Cooper was confident the company's three energy-related business segments could be successfully merged into its own energy-related manufacturing operations. Forbes magazine reported at the time that the merger was one of the ten largest in U.S. history. That year the company passed the $1 billion sales milestone, only three years after it had reached a half a billion dollars in sales.

During its acquisition spree, Cooper was criticized for handling acquisitions cold-heartedly. After acquiring Gardner-Denver, it closed the company's corporate headquarters, decentralized it, reduced employment, and cut benefits. Nevertheless, many analysts defended these actions, noting that Gardner-Denver had been full of operational problems and very poorly managed.

By the 1980s, Cooper was known for its manufacturing efficiency and willingness to make capital investments to improve production or market position. For instance, when the last domestic producer of the very hard steel needed to manufacture files stopped making it, Cooper developed a process for making its own steel that was different from the traditional method but still suitable for making files and doing it at half the cost.

In 1981, Cooper acquired the highly respected Crouse-Hinds Company of Syracuse, New York, makers of electrical products, after a long battle in which Cooper played white knight, rescuing Crouse-Hinds from Inter-North Corporation. Cooper also acquired the Belden Corporation, a wire and cable manufacturer that Crouse-Hinds had been in the process of purchasing. This acquisition expanded Cooper's size by 50 percent. Shortly after the merger, Cizik explained to Business Week that he had entered the electrical components business because "we needed to be in a business that looked beyond the 1980s and even the year 2000 for growth." When demand for gas and oil began to slump in 1981, Cooper's diversification paid off. Sales of the company's energy-related products dropped by 60 percent, but its other two divisions were hurt far less.

Acquisitions Culminate in 1995 Merger

Cizik continued to look for new acquisitions. Cooper's next move was a 1985 merger with McGraw-Edison Company, a manufacturer of electrical energy-related products for industrial, commercial, and utility use. The merger nearly doubled Cooper's size and made the company one of the largest lighting manufacturers in the world. Cooper's 1985 sales passed $3 billion.

After the McGraw-Edison deal, most Cooper acquisitions were on a somewhat smaller scale. In 1987, they included the molded rubber products division and the petroleum equipment and products group from Joy Technologies. In 1988, Cooper acquired RTE Corporation, a Wisconsin-based manufacturer of electrical distribution equipment, and Beswick, a manufacturer of fuses and related products in the United Kingdom. Then, in 1989, Cooper made another major acquisition, adding Champion Spark Plug Company, the world's leading manufacturer of spark plugs for combustion engines, to its arsenal. Based in Toledo, Ohio, Champion was also known as a major producer of windshield-wiper blades. In late November 1989, Cooper acquired Cameron Iron Works, a Houston-based maker of oil tools, ball valves, and forged products with annual sales of $611 million.

Cooper, before its initial public offering in 1995, manufactured more than a million products in 145 plants, 41 of them in foreign countries. Its annual revenues exceeded $4 billion. Despite its success, the company had divisions that were performing badly resulting in a backlog of debt that ate away at the impressive figures. In early 1995, the company faced a net loss for the year of $500.1 million. Management believed it was time for a reorganization, and in July the company went public as Cooper Cameron Corporation.

The restructured firm took dramatic steps in its first months. It sold the Wheeling Machine Products division for $14 million and used that to help pay down the company debt. It also sold its foundry in Richmond, Texas. Plants and facilities were combined in the United States, Mexico, the United Kingdom, and France, and employees were offered severance packages. The number of employees plummeted from 43,300 to 8,500.

As part of the organization, three new business divisions were created: Cameron, Cooper Energy Services, and Cooper Turbocompressor. Cameron, headquartered in Houston, was the petroleum production equipment side of the house and was organized into four business units, each reporting to a vice-president. The first three units were geographical: Eastern (Europe, Africa, former Soviet Union), Western (United States, Canada, Mexico, Central, and South America), and Asia-Pacific-Middle East. The fourth group was established to interface with valve customers and was called Cooper Cameron Valves. Cooper Energy Services, headquartered in Mt. Vernon, Ohio, concentrated on compression and power equipment for the energy industry. Cooper Turbocompressor, headquartered in Buffalo, New York, sold specialized compressors. In 1996, Cooper Cameron cleared a profit of $64.2 million on earnings of $1.4 billion. Nearly 60 percent of its business was conducted overseas.

Working to Become an Industry Leader: Mid-1990s and Beyond

In June 1996, the company acquired Ingram Cactus Corporation, a manufacturer of oil and gas production valves and actuators. The $100 million company was folded into the Cameron division and retained its brand name. Tundra Valve & Wellhead, a Canadian firm, was also acquired, along with some of the assets of ENOX Technologies, for a sum of $13,431,000. The company's revenue was up 21 percent over 1995 levels, with the Cameron segment individually seeing a 23 percent increase. The Cooper Energy Services/Cooper Turbocompressor segments were up 19 percent over 1995.

During the late 1990s, Cooper Cameron worked to establish itself even more firmly in the profitable and hazardous oil platforms of the North Sea. The company faced harsh competition from industry giants, including General Electric and other well-established firms such as European Gas Turbines, Caterpillar Inc., and Vetco Gray Inc. The company also focused on moving into turbine and compressor markets in Canada, Europe, the Middle East, and the Far East. In May 1997, the firm declared a two-for-one stock split and saw its stock price rise from $20 to $70 per share as a result.

Cooper Cameron made several key moves over the next few years that secured its position in the oil and gas industrial equipment and services industry. In 1998, Orbit Valve International Inc. was added to its holdings in a $100 million deal. The company also beefed up its Cooper Energy Services division by purchasing Ajax Repair & Supply, General Turbine Systems, and PDQ Machine. At this time the company embarked on a divestiture mission, selling off its stake in a rotating compressor product line venture to partner Rolls Royce plc for approximately $200 million. In 2001, the company closed its Springfield, Ohio, manufacturing plant, signaling its exit from the Superior brand natural gas engine market.

Cooper Cameron faced a challenging operating environment in the early years of the new century due to uncertainty in the North American market, weak energy demand, and unsteady pricing in energy markets. Revenues fluctuated from $1.8 billion in 1998 to $1.38 billion in 2000 and $1.53 billion in 2002. In an attempt to streamline its operations, the company restructured into three business segments in 2002. It combined its Cooper Energy Services and Cooper Turbocompressor divisions together to create a new division, Cooper Compression. In September of that year, various Stewart and Stevenson Services Inc.'s petroleum equipment holdings were merged into the company's Cameron division. In December, Canada-based Nutron Industries was folded into Cooper Cameron Valve's operations.

In May 2003, rumors began to surface that Cooper Cameron planned to make a $1 billion play for competitor Vetco Gray Inc., a subsidiary of industrial conglomerate ABB Ltd. The deal would significantly increase Cooper Cameron's size, giving it access to Vetco Gray's oil and gas equipment and services business. Neither company made an official announcement regarding the deal, and by July European buyout company Candover Investments plc was reportedly in negotiations with ABB.

Despite the apparent breakdown of its proposed offer for Vetco Gray, Cooper Cameron was poised to make additional acquisitions. The company's strong financial position--its debt-to-capitalization ratio was less than 14 percent--left it well positioned to add new companies to its holdings or make capital investments to improve its operations. While the health of the domestic and international energy sector remained in question, Cooper Cameron appeared to be on track for future growth.

Principal Divisions: Cameron; Cooper Cameron Valves; Cooper Compression.

Principal Competitors: ABB Ltd.; Dresser Inc.; Dril-Quip Inc.

Chronology

• Key Dates:
• 1833: Brothers Charles and Elias Cooper build a foundry in their hometown of Mount Vernon, Ohio.
• 1895: C. & G. Cooper Company is incorporated.
• 1929: Cooper and Bessemer Gas Engine Co. merge to form Cooper-Bessemer Corp.
• 1944: The company lists on the New York Stock Exchange.
• 1965: The firm changes its name to Cooper Inc.
• 1985: Cooper merges with McGraw-Edison Co.
• 1995: The company launches a major restructuring effort and goes public as Cooper Cameron Corporation.
• 2002: The company reorganizes into three business segments: Cameron; Cooper Cameron Valves; and Cooper Compression.