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<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, 1996.
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 _____
There were 6,648,683 shares of Common Stock, $1.00 par value per share
outstanding as of June 30, 1996, not including 143,698 shares classified as
Treasury Stock.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
LUFKIN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET--DECEMBER 31, 1995 AND JUNE 30, 1996
(Thousands of dollars)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS 12-31-95 6-30-96
------ -------- ----------
(Unaudited)
CURRENT ASSETS:
Cash $ 277 $ 39
Temporary investments 33,040 35,547
Receivables, net 36,204 27,724
Inventories 24,737 24,902
Deferred income taxes 3,853 3,853
--------- ---------
Total current assets 98,111 92,065
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, at cost 233,776 239,556
Less - Accumulated depreciation (172,953) (175,888)
--------- ---------
60,823 63,668
PREPAID PENSION COSTS 20,936 22,512
OTHER ASSETS 6,426 7,972
--------- ---------
$ 186,296 $ 186,217
========= =========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 11,430 $ 10,321
Accrued payroll and benefits 5,084 4,779
Accrued warranty expenses 2,032 1,881
Accrued property and other taxes 2,849 3,537
Other accrued liabilities 1,774 1,552
--------- --------
Total current liabilities 23,169 22,070
--------- --------
DEFERRED INCOME TAXES 8,500 8,500
POST RETIREMENT BENEFITS 12,035 12,079
SHAREHOLDERS' EQUITY:
Common stock, $1 par value per share;
20,000,000 shares authorized;
6,792,381 shares issued 6,792 6,792
Capital in excess of par 15,367 15,367
Retained earnings 121,692 125,023
Treasury stock, 143,698 shares at cost (311) (2,867)
Cumulative translation adjustment (948) (747)
------- -------
Total shareholders' equity 142,592 143,568
-------- -------
$ 186,296 $ 186,217
========= =========
</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 Six Months
Ended June 30 Ended June 30
----------------------------- ---------------------------
(Unaudited) (Unaudited)
1995 1996 1995 1996
---------- -------- ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $58,638 $55,580 $117,613 $111,510
COSTS OF SALES 50,225 45,715 102,468 92,869
------- ------- -------- --------
Gross profit 8,413 9,865 15,145 18,641
SELLING, GENERAL AND ADMINISTRATION
EXPENSES 5,746 5,687 10,859 11,259
------- ------- -------- --------
Operating income (loss) 2,667 4,178 4,286 7,382
OTHER INCOME, NET 1,030 452 1,839 995
------- ------- -------- --------
Earnings before income taxes 3,697 4,630 6,125 8,377
PROVISION FOR INCOME TAXES 1,263 1,704 2,072 3,016
------- ------- -------- --------
Net earnings $ 2,434 $ 2,926 $ 4,053 $ 5,361
======= ======== ======= ========
EARNINGS PER SHARE $ .36 $ .43 $ .60 $ .79
===== ===== ===== =====
DIVIDENDS PER SHARE $ .15 $ .15 $ .30 $ .30
===== ===== ===== =====
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 6,800,224 6,746,645 6,805,198 6,775,218
</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, 1995 AND 1996
(Thousands of dollars)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30
------------------------------------
(Unaudited)
1995 1996
----------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 4,053 $ 5,361
Adjustments to reconcile earnings
to net cash provided by operating
activities:
Depreciation 3,508 3,405
Pension benefit (1,526) 44
Net changes in operating
assets and liabilities (839) 7,217
------- -------
Net cash provided by operating activities 5,196 16,027
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and
equipment (3,785) (6,380)
Sales of property, plant and
equipment 408 129
(Increase) decrease in other assets 128 (3,121)
------- ------
Net cash provided by (used by) investing
activities (3,249) (9,372)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (2,036) (2,031)
Proceeds from exercise of stock options - 2
Purchase of treasury stock (214) (2,558)
------- ------
Net cash used by financing activities (2,250) (4,587)
Effect of translation on cash and temporary
investments (5) 201
------- ------
Net increase (decrease) in cash and temporary
investments (308) 2,269
Cash and temporary investments, at
beginning of period 36,923 33,317
------- -------
Cash and temporary investments, at
end of period $36,615 $ 35,586
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
LUFKIN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) In the opinion of management, the accompanying unaudited
consolidated financial statements reflect all adjustments, which include only
normal recurring adjustments, necessary to present fairly the financial
position, results of operations and cash flows of Lufkin Industries, Inc. and
Subsidiaries (the "Company") for all periods presented. The consolidated
balance sheet as of December 31, 1995, was derived from the audited
consolidated balance sheet included in the Company's 1995 annual report on Form
10-K. The results of operations for the six months ended June 30, 1996, are
not necessarily indicative of the results that may be expected for the full
fiscal year.
These statements have been prepared in accordance with the
requirements for interim financial statements contained in Regulation S-X,
which do not require all the information and footnotes necessary for a fair
presentation of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. Therefore, these
statements should be read in conjunction with the consolidated financial
statements and related footnotes included in the Company's annual report on
Form 10-K for the fiscal year ended December 31, 1995.
(2) Consolidated inventories consist of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
12-31-95 6-30-96
--------- --------
(Thousands of dollars)
Raw materials and purchased
parts $11,842 $11,920
Work in process 6,050 6,091
Finished goods 6,845 6,891
------- -------
$24,737 $24,902
======= =======
</TABLE>
<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 June 30, 1996, the Company had working capital of $69,995,000 as compared
to $74,942,000, at December 31, 1995, a decrease of $4,947,000.
(2) Changes in Results of Operations
Net sales for the three months and the six months ended June 30, 1996
decreased 5% over the same periods ended June 30, 1995. Sales by product group
for the three months and six months ended June 30, 1995 and 1996 were as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
June 30 % June 30 %
------------------ Increase ------------------ Increase
1995 1996 (Decrease) 1995 1996 (Decrease)
-------- -------- ----------- -------- -------- -----------
(In thousands) (In thousands)
<S> <C> <C> <C> <C> <C> <C>
Oil field pumping
units $ 9,948 $11,688 17% $ 21,315 $ 24,512 15%
Power transmission
products 13,741 20,002 46% 25,413 35,670 40%
Foundry castings 8,045 7,821 (3%) 16,310 15,970 (2%)
Trailers 26,904 16,069 (40%) 54,575 35,358 (35%)
------- ------- ---- -------- -------- ----
$58,638 $55,580 (5%) $ 117,613 $111,510 (5%)
======= ======= ==== ======== ======== ====
</TABLE>
The decrease in the Company's sales was primarily due to decreased
trailer volumes associated with weaker trailer market demands. The company
experienced increased oil field pumping unit sales of 17% and 15% respectively
for the second quarter and for the first six months of 1996 as compared to the
same periods of 1995. These increases reflect a more active Canadian market and
the shipment of units into Argentina. The Company's power transmission group
experienced increases of 46% and 40% respectively. These increases reflect
shipments into the strong capital goods sector of the economy and the Company's
increased capacity created by its capital expansion efforts.
The Company experienced improved gross profits and gross margins for the
three months and six months ended June 30, 1996 as compared to the same periods
ending June 30, 1995. Both improvements reflect the favorable mix effect of
increased shipments of oil field and power transmission products which produce
higher margins than those of trailer products. Also contributing to these
improvements were benefits generated by the Company's continued emphasis of cost
reduction. During these same periods, the Company's trailer division continued
to produce profitable results while experiencing a significant reduction in
volumes.
Selling, General and Administrative Expenses (S. G. & A.) increased
$400,000 or 4% for the six months ended June 30, 1996, from $10,859,000 for the
same period in 1995. This increase primarily reflects the full six month impact
of increased selling, engineering, and administrative expenditures for the
Company's power transmission products to expand its worldwide capabilities and
presence in new markets with new product offerings.
Other income for the first six months of 1996 was $995,000. This
represents a decrease of $844,000 or 46% in other income over the same period in
1995 resulting from lower earnings on investments during a period of rising
interest rates.
The provision for income taxes increased $441,000 and $944,000
respectively for the three months and six months ended June 30, 1996 as compared
to the same periods in 1995. The increases in the provision resulted from the
increases in pretax income.
<PAGE>
The Company reported net earnings in the first six months of 1996 of
$5,361,000 compared to $4,053,000 in the first six months of 1995. The increase
in net earnings resulted primarily from the increased volume of oil field
pumping unit and power transmission product sales and the Company's continued
effort to reduce expenses.
Backlog at June 30, 1996, decreased by approximately $28,700,000 or 29%
below the prior year end backlog. The primary reason for the decline was the
downturn in orders for trailer products and the completion and shipment of
orders into Argentina.
Backlog by product group at December 31, 1995 and June 30, 1996 is as
follows:
<TABLE>
<CAPTION>
December 31 June 30 %
1995 1996 Change
----------- -------- --------
(In thousands)
<S> <C> <C> <C>
Oil field pumping units $ 8,103 $ 4,246 (48%)
Power transmission products 36,008 33,774 (5%)
Foundry castings 15,838 14,469 (9%)
Trailers 40,151 18,864 (53%)
-------- ------- -----
$100,100 $71,353 (29%)
======== ======= =====
</TABLE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
27-Financial Data Schedule
(B) Reports on Form 8-K
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 8/14/96 /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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 39
<SECURITIES> 35,547
<RECEIVABLES> 28,324
<ALLOWANCES> 600
<INVENTORY> 24,902
<CURRENT-ASSETS> 92,065
<PP&E> 239,556
<DEPRECIATION> 175,888
<TOTAL-ASSETS> 186,217
<CURRENT-LIABILITIES> 22,070
<BONDS> 0
0
0
<COMMON> 6,792
<OTHER-SE> 136,776
<TOTAL-LIABILITY-AND-EQUITY> 186,217
<SALES> 111,510
<TOTAL-REVENUES> 111,510
<CGS> 92,869
<TOTAL-COSTS> 104,128
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,377
<INCOME-TAX> 3,016
<INCOME-CONTINUING> 5,361
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,361
<EPS-PRIMARY> .79
<EPS-DILUTED> .79
</TABLE>
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