<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994.
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-2612
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LUFKIN INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Texas 75-040-4410
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
601 Raguet, Lufkin, Texas 75902-0849
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 409-634-2211
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Indicate by check mark whether the registrant (1) has filed all reports re-
quired 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 re-
gistrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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As of June 30, 1994, there were 6,792,381 shares of Common Stock, $1.00 par
value per share, issued and outstanding.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LUFKIN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET--DECEMBER 31, 1993 AND JUNE 30, 1994
(Thousands of dollars)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS 12-31-93 6-30-94
- - ----------------------------------------- --------- --------
(Unaudited)
CURRENT ASSETS:
Cash $ 816 $ 200
Temporary investments 19,539 33,043
Receivables, net 37,603 30,022
Inventories 32,332 28,715
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Total current assets 90,290 91,980
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PROPERTY, PLANT AND EQUIPMENT, at cost 225,794 224,040
Less - Accumulated depreciation 161,538 162,921
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64,256 61,119
--------- --------
PREPAID PENSION COST 14,156 15,819
ASSETS HELD FOR SALE 3,164 404
OTHER ASSETS 7,550 7,780
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$ 179,416 $177,102
========= ========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 9,865 $ 9,532
Accrued payroll and benefits 4,683 4,252
Accrued warranty expenses 2,941 3,141
Accrued property and other taxes 2,786 2,320
Other accrued liabilities 2,401 1,990
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Total current liabilities 22,676 21,235
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DEFERRED INCOME TAXES PAYABLE 1,622 1,622
POST RETIREMENT BENEFITS LIABILITY 11,627 11,752
SHAREHOLDERS' EQUITY:
Common stock, $1 par value per share;
20,000,000 shares authorized;
6,792,381 shares outstanding 6,792 6,792
Capital in excess of par 15,372 15,372
Retained earnings 122,127 121,009
Cumulative translation adjustment (800) (680)
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Total shareholders' equity 143,491 142,493
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$179,416 $177,102
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</TABLE>
See accompanying notes to consolidated financial statements.
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LUFKIN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(Thousands of dollars, except per share data)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30 Ended June 30
-------------------------- ---------------------------
(Unaudited) (Unaudited)
1993 1994 1993 1994
-------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $48,294 $53,900 $94,113 $103,044
COST OF SALES 43,621 48,940 85,048 92,356
------- ------- ------- --------
Gross profit 4,673 4,960 9,065 10,688
SELLING, GENERAL AND
ADMINISTRATION EXPENSES 6,387 5,693 12,471 11,268
------- ------- ------- --------
Operating income (loss) (1,714) (733) (3,406) (580)
OTHER INCOME, NET 586 1,458 1,101 1,973
------- ------- ------- --------
Earnings (loss) before
income taxes (1,128) 725 (2,305) 1,393
PROVISION FOR INCOME TAXES - 247 - 474
------- ------- ------- --------
Net earnings (loss) $(1,128) $ 478 $(2,305) $ 919
======= ======= ======= ========
EARNINGS (LOSS) PER SHARE (Based on
weighted average number of shares
outstanding of 6,793,751 shares and
6,795,877 shares for June 30, 1993
and 1994, respectively) $(.16) $.07 $(.33) $.14
======== ======= ======= ======
DIVIDENDS PER SHARE $ .15 $.15 $ .30 $.30
======== ======= ======= ======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
LUFKIN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1993 AND 1994
(Thousands of dollars)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30
--------------------
(Unaudited)
1993 1994
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $(2,305) $ 919
Adjustments to reconcile earnings (loss)
to net cash provided by operating
activities:
Depreciation 4,397 3,961
Changes in assets and liabilities 4,228 9,882
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Net cash provided by operating activities 6,320 14,762
CASH FLOWS PROVIDED (USED) IN INVESTING ACTIVITIES:
Net additions to property, plant and
equipment (1,782) (2,037)
Proceeds from the sale of assets - 3,974
Increase (decrease) in other assets (1,358) (1,773)
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Net cash provided (used) in investing activities (3,140) 164
CASH FLOWS USED IN FINANCING ACTIVITIES:
Dividends paid (2,038) (2,038)
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Net increase in cash and temporary
investments 1,142 12,888
Cash and temporary investments, at
beginning of period 11,568 20,355
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Cash and temporary investments, at
end of period $12,710 $33,243
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</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
LUFKIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) The consolidated financial statements included herein have been prepared
by the Company, without audit, except for the December 31, 1993 Balance Sheet,
pursuant to the rules and regulations of the Securities and Exchange Commission.
The information furnished reflects all adjustments (consisting of only normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of the results of interim periods. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. These condensed financial statements should be read in conjunction
with the financial statements and the notes thereto included in the Company's
latest annual report on Form 10-K, particularly with regard to disclosures
relating to major accounting policies, etc.
(2) Consolidated inventories consist of the following:
<TABLE>
<CAPTION>
12-31-93 6-30-94
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(Thousands of dollars)
<S> <C> <C>
Raw materials and purchased
parts $ 13,123 $ 10,471
Work in process 6,773 6,195
Finished goods 12,436 12,049
--------- --------
$ 32,332 $ 28,715
========= ========
</TABLE>
During the second quarter of 1994, the Company recorded a $1,500,000 inventory
loss provision. The loss provision was recorded as the result of the Company's
completion of an internal review of raw material and spare parts inventories in
its oilfield products. During the third quarter of 1994, the Company will
review its alternatives to realize its existing finished pumping unit
inventories which were originally produced for the Soviet and other
international markets.
(3) During the second quarter of 1994, the Company benefited from pre-tax
gains on the sale of its Chanute, Kansas manufacturing facilities offset by a
small loss on the sale of its Industrial Supplies Division.
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Item 2. Management's Discussion and Analysis
LUFKIN INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(1) Changes in Financial Condition
At June 30, 1994, the Company had working capital of $70,745,000 as
compared to $67,614,000, at December 31, 1993, an increase of $3,131,000.
(2) Changes in Results of Operations
Net sales for the three months and the six months ended June 30, 1994
increased 12% and 9% respectively over the same periods ended June 30, 1993.
Sales by product group for the three months and six months ended June 30, 1993
and 1994 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
June 30 % June 30 %
------------------ Increase ----------------- Increase
1993 1994 (Decrease) 1993 1994 (Decrease)
-------- -------- ---------- ------- -------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Oilfield pumping
units $14,923 $ 9,510 (36) $26,839 $ 19,628 (27)
Power transmission
products 10,759 14,441 34 22,253 28,154 27
Commercial products 6,466 7,250 12 12,129 13,844 14
Industrial supplies 2,328 1,343 (42) 4,129 3,052 (26)
Trailers 13,818 21,356 55 28,763 38,366 33
------- ------- ------- --------
$48,294 $53,900 12 $94,113 $103,044 9
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</TABLE>
The major causes of the increase in the Company's sales were primarily
increased trailer volumes associated with stronger trailer market demands
together with increases in sales of power transmission products and commercial
products. Offsetting these increases were continued severe declines in oilfield
pumping unit volumes.
The gross profit for the first six months of 1994 was 10%, unchanged from
the same period of 1993. The improvements realized by the increased trailer
volumes were offset by the significant decline in oilfield volumes, unfavorable
changes in the power transmission product mix and the Company's recording of an
inventory loss provision of $1,500,000 in the second quarter. The loss
provision was recorded as the result of the Company's completion of an initial
review of raw material and spare parts inventories in its oilfield products.
During the third quarter of 1994, the Company will review its alternatives to
realize its existing finished pumping unit inventories which were originally
produced for the Soviet and other international markets.
Selling, General and Administrative Expenses (S. G. & A.) decreased
$1,203,000 or 10% from $12,471,000 for the same period in 1993. This reduction
reflects the Company's continued emphasis on cost containment.
Other income for the first six months of 1994 was $1,973,000. This
represents an increase of $872,000 or 79% in other income over the same period
in 1993. The major component of this increase was a gain on the sale of the
Company's Chanute, Kansas manufacturing facility. This facility was closed in
1993 as part of the Company's strategy to improve its manufacturing efficiencies
and operating margins.
The provision for income taxes increased $247,000 and $474,000 respectively
for the three months and six months ended June 30, 1994 as compared to the same
periods in 1993. The increases in the provision relate directly to earnings
being reported in each of the periods ended June 30, 1994 compared to reported
losses for the same periods in 1993. A tax rate of 34% was utilized in
recording the 1994 provisions.
The Company reported net earnings in the first six months of 1994 of
$919,000 compared to a loss of $2,305,000 in the first six months of 1993. The
increase in net earnings resulted primarily from the increased volume of trailer
sales and the Company's continued effort to reduce expenses.
Backlog at June 30, 1994, increased by approximately $50,435,000 over the
prior year backlog. New trailer orders were the primary reason for this
increase.
<PAGE>
Backlog by product group at June 30, 1993 and 1994 is as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C> <C>
6/30/93 6/30/94
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Oilfield pumping units $ 4,599 $ 6,879
Power transmission products 25,640 22,031
Commercial products 4,157 3,954
Trailers 31,251 83,218
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$65,647 $116,082
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</TABLE>
PART II - OTHER INFORMATION
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LUFKIN INDUSTRIES, INC.
Date August 8, 1994 [Signature of C. James Haley, Jr. appears here]
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C. James Haley, Jr.
Secretary-Treasurer
(Principal financial officer
and officer authorized to
sign on behalf of the
registrant)
