<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 September 30, 1994.
------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-----------------------------------------------
Commission File Number 0-2612
------
LUFKIN INDUSTRIES, INC.
- - ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 75-040-4410
------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
601 South Raguet, Lufkin, Texas 75901
- - ------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 409-634-2211
--------------
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
----- -----
As of September 30, 1994, there were 6,792,381 shares of Common Stock, $1.00
par value per share, issued and outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LUFKIN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED BALANCE SHEET--DECEMBER 31, 1993 AND SEPTEMBER 30, 1994
--------------------------------------------------------------------
(Thousands of dollars)
<TABLE>
<CAPTION>
ASSETS 12-31-93 9-30-94
- - ----------------------------------------- --------- --------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 816 $ 800
Temporary investments 19,539 37,204
Receivables, net 37,603 27,467
Inventories 32,332 21,146
--------- --------
Total current assets 90,290 86,617
--------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost 225,794 223,745
Less - Accumulated depreciation 161,538 163,607
--------- --------
64,256 60,138
--------- --------
PREPAID PENSION COSTS 14,156 16,779
OTHER ASSETS 10,714 7,314
--------- --------
$ 179,416 $170,848
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 9,865 $ 11,463
Accrued payroll and benefits 4,683 5,123
Accrued warranty expenses 2,941 2,517
Accrued property and other taxes 2,786 1,720
Other accrued liabilities 2,401 1,887
-------- --------
Total current liabilities 22,676 22,710
-------- --------
DEFERRED INCOME TAXES PAYABLE 1,622 -
POST RETIREMENT BENEFITS LIABILITY 11,627 11,789
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 122,127 114,882
Cumulative translation adjustment (800) (697)
-------- --------
Total shareholders' equity 143,491 136,349
-------- --------
$179,416 $170,848
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
LUFKIN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED STATEMENT OF EARNINGS
----------------------------------
(Thousands of dollars, except per share data)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30 Ended September 30
--------------------- ----------------------
(Unaudited) (Unaudited)
1993 1994 1993 1994
------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
NET SALES $52,786 $55,913 $146,899 $158,957
COSTS AND PROVISION
Cost of sales 45,715 49,344 130,763 140,200
Special inventory provision - 10,224 - 11,724
------- ------- -------- --------
Total cost of sales 45,715 59,568 130,763 151,924
------- ------- -------- --------
Gross profit (loss) 7,071 (3,655) 16,136 7,033
SELLING, GENERAL AND ADMINISTRATION
EXPENSES 6,250 4,600 18,721 15,868
------- ------- -------- --------
Operating income (loss) 821 (8,255) (2,585) (8,835)
OTHER INCOME, NET 473 515 1,574 2,488
------- ------- -------- --------
Earnings (loss) before income taxes 1,294 (7,740) (1,011) (6,347)
PROVISION (BENEFIT) FOR INCOME TAXES - (2,632) - (2,158)
------- ------- -------- --------
Net earnings (loss) $ 1,294 $(5,108) $ (1,011) $ (4,189)
======= ======= ======== ========
EARNINGS (LOSS) PER SHARE (Based on
weighted average number of shares
outstanding of 6,793,751 shares and
6,795,877 shares for September 30,
1993 and 1994, respectively) $.19 $(.76) $(.15) $(.62)
===== ======== ====== =======
DIVIDENDS PER SHARE $.15 $ .15 $ .45 $.45
======= ======= ======= ====
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
LUFKIN INDUSTRIES, INC. AND SUBSIDIARIES
----------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1993 AND 1994
-----------------------------------------------------
(Thousands of dollars)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30
---------------------
(Unaudited)
1993 1994
-------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $(1,011) $(4,189)
Adjustments to reconcile earnings (loss)
to net cash provided by operating
activities:
Depreciation 6,613 5,865
Changes in assets and liabilities 5,693 18,823
------- -------
Net cash provided by operating activities 11,295 20,499
CASH FLOWS PROVIDED (USED) IN INVESTING ACTIVITIES:
Net additions to property, plant and
equipment (3,686) (3,096)
Proceeds from the sale of assets - 4,110
Increase in other investments
and other assets (2,421) (808)
------- -------
Net cash used by investing activities (6,107) (206)
CASH FLOWS USED IN FINANCING ACTIVITIES:
Dividends paid (3,056) (3,056)
------- -------
Net increase in cash and temporary
investments 2,132 17,649
Cash and temporary investments, at
beginning of period 11,568 20,355
------- -------
Cash and temporary investments, at
end of period $13,700 $38,004
======= =======
</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 9-30-94
--------- --------
(Thousands of dollars)
<S> <C> <C>
Raw materials and purchased
parts $ 13,123 $ 7,941
Work in process 6,773 6,768
Finished goods 12,436 6,437
--------- --------
$ 32,332 $ 21,146
========= ========
</TABLE>
Due to the severe decline in its 1994 oilfield sales and to the changing
economic conditions in both Russia and Venezuela, the Company recorded a
$10,224,000 inventory loss provision in the third quarter of 1994 related
primarily to existing finished pumping unit inventories originally produced for
these markets. During the second quarter of 1994, the Company recorded a
$1,500,000 inventory loss provision for slow moving raw materials and spare
parts inventories.
<PAGE>
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 September 30, 1994, the Company had working capital of $64,443,000 as
compared to $67,614,000, at December 31, 1993, a decrease of $3,171,000.
(2) Changes in Results of Operations
Net sales for the three months and the nine months ended September 30, 1994
increased 6% and 8% respectively over the same periods ended September 30, 1993.
Sales by product group for the three months and nine months ended September 30,
1993 and 1994 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
September 30 % September 30 %
------------------ Increase ------------------ Increase
1993 1994 (Decrease) 1993 1994 (Decrease)
-------- -------- ---------- -------- -------- ----------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Oilfield pumping
units $14,745 $ 9,346 (37) $ 41,585 $ 28,974 (30)
Power transmission
products 11,885 13,447 13 34,138 41,631 22
Commercial products 6,586 8,182 24 18,715 22,026 18
Industrial supplies 1,781 - (100) 5,910 3,052 (48)
Trailers 17,789 24,908 40 28,763 63,274 36
------- ------- -------- --------
$52,786 $55,913 6 $146,899 $158,957 8
======= ======= ======== ========
</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 nine months of 1994 was $7,033,000 compared
to $16,136,000 for the same period of 1993. The 1994 results included an
$11,724,000 inventory loss provision for slow moving raw materials, spare parts
and finished pumping unit inventories associated with the severe decline in 1994
oilfield sales and the changing economic conditions in Russia and Venezuela.
The nine month's gross profit before these provisions was $18,757,000 compared
to $16,136,000 for the same period of 1993, up 16%. This increase was due
primarily to increased sales volumes in trailers and commercial products.
Selling, general and administrative expenses (S. G. & A.) were
$15,868,000, down $2,853,000 or 15% from the same period in 1993. This
reduction reflects the Company's emphasis on cost containment and the sale of
its Industrial Supplies operation and the closure of the Company's oilfield
manufacturing facility in Chanute, Kansas.
Other income for the first nine months of 1994 was $2,488,000 compared to
$1,574,000 for the same period in 1993. This represents an increase of $914,000
or 58%. The major component of this increase was a $1,385,000 pre-tax gain on
the sale of the Company's Chanute, Kansas manufacturing facility. This facility
was closed in December of 1993 as part of the Company's strategy to improve its
oilfield manufacturing efficiencies and operating margins.
In 1994 the Company recorded income tax benefits of $2,632,000 and
$2,158,000, respectively, for the three month and nine month periods ending
September 30, 1994 representing 34% of the loss before income taxes. At
September 30, 1994, the tax benefit was recorded by reversing previously
recorded deferred income taxes of $1,622,000 and by recording a net deferred tax
asset of $536,000 included in other assets. No income tax provision or benefit
was recorded during the three or nine month periods ending September 30, 1993
because of the cumulative pre-tax losses reported through that date.
The Company reported a net loss of $4,189,000 in the first nine months of
1994 compared to a net loss of $1,011,000 for the same period of 1993. Included
in the 1994 reported loss was a $7,738,000 net loss related to the special
inventory loss provision.
<PAGE>
The Company's backlog at September 30, 1994 was $113,900,000 compared to
$66,000,000 at September 30, 1993. This represents an increase of $47,900,000
or 73%. The increase is due primarily to increased new trailer orders. The
backlog by product group at September 30, 1993 and 1994 is as follows:
<TABLE>
<CAPTION>
(In thousands)
9/30/93 9/30/94
-------- --------
<S> <C> <C>
Oilfield pumping units $ 11,500 $ 7,500
Power transmission products 26,200 20,800
Commercial products 5,100 5,200
Trailers 23,200 80,400
-------- --------
$66,000 $113,900
======= ========
</TABLE>
PART II - OTHER INFORMATION
None.
<PAGE>
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 11/8/94 /s/ C. James Haley, Jr.
--------------------- -------------------------------------
C. James Haley, Jr.
Secretary-Treasurer
(Principal financial officer
and officer authorized to
sign on behalf of the
registrant)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 800
<SECURITIES> 37,204
<RECEIVABLES> 27,467
<ALLOWANCES> 0
<INVENTORY> 21,146
<CURRENT-ASSETS> 86,617
<PP&E> 223,745
<DEPRECIATION> 163,607
<TOTAL-ASSETS> 170,848
<CURRENT-LIABILITIES> 22,710
<BONDS> 0
<COMMON> 6,792
0
0
<OTHER-SE> 129,557
<TOTAL-LIABILITY-AND-EQUITY> 170,848
<SALES> 158,957
<TOTAL-REVENUES> 158,957
<CGS> 151,924
<TOTAL-COSTS> 167,792
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,347)
<INCOME-TAX> (2,158)
<INCOME-CONTINUING> (4,189)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,189)
<EPS-PRIMARY> (.62)
<EPS-DILUTED> (.62)
</TABLE>
