LUFKIN, Texas, July 15 /PRNewswire-FirstCall/ -- Lufkin Industries,
Inc. (NASDAQ:LUFK) today announced financial results for the second
quarter of 2009. Excluding the impact of a $1.3 million (net of
tax), or $0.08 per diluted share provision related to the
class-action lawsuit against the Company, earnings from continuing
operations for the second quarter of 2009 declined to $6.0 million,
or $0.40 per diluted share, compared with $21.2 million, or $1.42
per diluted share, for the second quarter of 2008. Including the
impact of the lawsuit, reported earnings from continuing operations
for the second quarter of 2009 were $4.7 million, or $0.32 per
diluted share. Revenues declined 29% to $123.7 million compared to
$174.5 million for the second quarter of 2008. "As expected, the
second quarter of 2009 was a difficult one for our entire
industry," said John F. "Jay" Glick, president and chief executive
officer of Lufkin. "We felt the full brunt of the decline in
commodity prices and the depressed global economy. "Bookings in
both our Oil Field and Power Transmission divisions were up from
the first quarter of 2009, but they were down significantly from
2008 levels, when we saw record levels of activity. A number of
international projects continue to be deferred while some North
American projects continue to be cancelled altogether, particularly
by the majors. However, cancellations were down significantly from
the first quarter of 2009. "This slowdown is impacting all our
markets, but the U.S. market continues to be the most depressed. We
have seen significant declines in drilling activity in the Barnett
and Haynesville shale gas basins primarily due to the depressed
level of natural gas prices relative to the price of crude oil and
gas-on-gas competition. Depressed natural gas prices are impacting
cash flows, and therefore, the budgets of both our major and
independent oil and gas customers are being constrained. As a
result, crude oil projects are being delayed or cancelled as well.
"Our combined order backlog declined to $162.3 million in the
second quarter from $309.7 million in the second quarter of last
year and from $208.0 million at the end of the 2009 first quarter,"
he added. "We continue to view the uncertain energy markets and
economic conditions as a short- to mid-term risk to our operations.
Although we expect it to take two more quarters for our customers
to pull down existing inventories, we remain optimistic that the
situation will begin to improve in the second half of 2009. In the
Power Transmission Division, we have already seen signs of
stabilization in orders for our high-speed gearboxes, and we are
seeing opportunities in new markets for our artificial lift
services and systems. "We continue to take steps to reduce costs to
improve our competitive position. We have reduced our workforce by
roughly 16% year to date, some operations were placed on short work
weeks and overtime pay was eliminated. We are continuing to work on
unwinding commitments made late last year in our supply chain, and
we should soon see the decline in material costs benefiting our
profit margins. "Our recent strategic acquisitions demonstrate that
we remain focused on the longer term growth of the company. Our
most recent acquisition of RMT enhances our opportunities to
provide a broader range of technology to the turbo compressor
sector that supports the energy industry." SECOND QUARTER RESULTS
Oil Field Division - Oil Field revenues for the second quarter of
2009 decreased 41% to $75.0 million, compared to $126.5 million in
the second quarter of 2008. By comparison, Oil Field revenues in
the first quarter of 2009 totaled $111.7 million. The
year-over-year decrease was led by a 51% decline in new unit sales,
primarily in North America, as well as a 38% drop in Automation
sales. Sales from recently acquired ILS contributed $4.2 million
during the second quarter of 2009. Oil Field's new business
bookings declined 83% from the second quarter of 2008 but were up
106% from the first quarter of 2009. Oil Field's backlog decreased
to $53.1 million at the end of the second quarter from $170.9
million at the end of last year's second quarter and $93.3 million
at March 31, 2009. This decrease was caused primarily by lower
orders for new pumping units, as customers deferred or cancelled
drilling programs in response to lower energy prices, and by the
inventory overhang in a number of our customers' fields. The Oil
Field Division experienced approximately $8 million in cancelled
orders during the second quarter, which is down significantly from
the first quarter. The continued low level of drilling activity has
also slowed our draws on raw materials inventory, which we built up
during a higher-priced materials environment last year. The Company
believes supply costs have begun to bottom out, based on our
internal unit cost analysis. Power Transmission Division - Sales of
Lufkin's Power Transmission products increased 2% to $48.7 million
compared to $48.0 million in last year's second quarter, and
increased by 18% from the first quarter of 2009. The year-over-year
increase was driven by a 3% increase in new unit sales to $38.1
million. Bookings in Power Transmission increased 60% sequentially
but declined 13% from a year ago to $43 million. Power Transmission
backlog at June 30, 2009, decreased to $109.1 million from $138.8
million at June 30, 2008, and $114.7 million at March 31, 2009.
Consolidated - Gross profit margin for the second quarter decreased
to 21.8% of revenues, compared to 27.4% of revenues in last year's
second quarter. Operating income, which includes the pre-tax impact
of $2 million in additional litigation expense, declined to $6.4
million in the second quarter, compared to $30.8 million in last
year's second quarter. Selling, general and administrative expenses
as a percentage of revenues increased to 15% of revenues compared
to 10% in the prior-year quarter as a result of declining revenues
and the labor component of our SG&A expense. OUTLOOK
"Volatility in oil prices continues to adversely affect our
customers' investment decisions. The outlook for global economic
recovery remains uncertain, which makes demand forecasts for energy
an even less exact science than normal. Against the backdrop of
continued uncertainty, we are working aggressively to control costs
and improve efficiencies, while at the same time investing in
improvements in our people, our production equipment, and in
developing technologies that differentiate our products by
delivering more value to our customers. We are also acquiring
companies that fit our strategy for growth through expanding our
base of product and service technologies," Glick said. CONFERENCE
CALL Lufkin will discuss its second quarter financial results in a
conference call today at 10:00 a.m. Eastern Time (9:00 a.m. Central
Time). To listen to the call, dial (480) 629-9772 and ask for the
"Lufkin Industries" call at least 10 minutes prior to the start.
The conference call will also be broadcast live via the Internet
and can be accessed through the "Earnings Conference Call" page of
Lufkin's corporate website at http://www.lufkin.com/. A telephonic
replay will be available through July 22 by dialing (303) 590-3030
and entering reservation number 4106097#. Lufkin Industries, Inc.
sells and services oilfield pumping units, foundry castings and
power transmission products throughout the world. The Company has
vertically integrated all vital technologies required to design,
manufacture and market its products. FORWARD-LOOKING STATEMENTS
This release contains forward-looking statements and information
that are based on management's beliefs as well as assumptions made
by and information currently available to management. When used in
this release, the words "anticipate," "believe," "estimate,"
"expect" and similar expressions are intended to identify
forward-looking statements. Such statements reflect the Company's
current views with respect to certain events and are subject to
certain assumptions, risks and uncertainties, many of which are
outside the control of the Company. These risks and uncertainties
include, but are not limited to, (i) oil prices, (ii) capital
spending levels of oil producers, (iii) availability and prices for
raw materials and (iv) general industry and economic conditions.
Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may
vary materially from those anticipated, believed, estimated or
expected. The Company does not intend to update these
forward-looking statements and information. Contact: Christopher L.
Boone Chief Financial Officer 936-631-2749 DRG&E Jack Lascar /
713-529-6600 Anne Pearson / 210-408-6321 (Tables to follow) LUFKIN
INDUSTRIES, INC. Financial Highlights (In thousands, except per
share data) (unaudited) Three Months Ended Six Months Ended June
30, June 30, 2009 2008 2009 2008 Sales $123,739 $174,488 $276,877
$315,558 Cost of sales 96,743 126,693 215,698 227,243 Gross profit
26,996 47,795 61,179 88,315 Selling, general and administrative
expenses 18,593 16,976 37,023 33,741 Litigation reserve 2,000 0
5,000 0 Operating income 6,403 30,819 19,156 54,574 Other income
(expense), net 675 715 1,215 933 Earnings from continuing
operations before income tax provision 7,078 31,534 20,371 55,507
Income tax provision 2,344 10,356 6,537 18,744 Earnings from
continuing operations 4,734 21,178 13,834 36,763 Earnings (loss)
from discontinued operations, net of tax (237) 55 (359) 99 Net
earnings $4,497 $21,233 $13,475 $36,862 Basic earnings per share:
Earnings from continuing operations $0.32 $1.44 $0.93 $2.50
Earnings from discontinued operations $(0.02) $- $(0.02) $0.01 Net
earnings $0.30 $1.44 $0.91 $2.51 Diluted earnings per share:
Earnings from continuing operations $0.32 $1.42 $0.93 $2.47
Earnings from discontinued operations $(0.02) $- $(0.02) $0.01 Net
earnings $0.30 $1.42 $0.91 $2.48 Dividends per share $0.25 $0.25
$0.50 $0.50 Weighted average number of shares outstanding: Basic
14,860,803 14,772,015 14,860,799 14,707,037 Diluted 14,897,701
14,922,885 14,895,122 14,864,895 LUFKIN INDUSTRIES, INC. Balance
Sheet Highlights (Thousands of dollars) June 30, Dec. 31, 2009 2008
Current assets $319,099 $385,738 Total assets 519,092 530,718
Current liabilities 58,874 88,813 Shareholders' equity 418,928
413,937 Working capital 260,225 296,925 LUFKIN INDUSTRIES, INC.
Division Performance (Thousands of dollars) Three Months Ended Six
Months Ended June 30, June 30, 2009 2008 2009 2008 Sales: Oil field
$74,994 $126,507 $186,677 $227,416 Power transmission 48,745 47,981
90,200 88,142 Total $123,739 $174,488 $276,877 $315,558 June 30,
March 31, June 30, 2009 2009 2008 Backlog: Oil field $53,122
$93,306 $170,917 Power transmission 109,138 114,708 138,785 Total
$162,260 $208,014 $309,702 LUFKIN INDUSTRIES, INC. Reconciliation
of Net Income under U.S. GAAP to Adjusted Net Earnings (In
thousands, except per share data) (unaudited) Three Months Ended
June 30, 2009 2008 Earnings from continuing operations $4,734
$21,178 Plus: Litigation reserve, net of tax 1,280 - Adjusted net
earnings from continuing operations $6,014 $21,178 Diluted earnings
per share: Earnings from continuing operations $0.32 $1.42 Plus:
Litigation reserve $0.08 $- Adjusted net earnings $0.40 $1.42
DATASOURCE: Lufkin Industries, Inc. CONTACT: Christopher L. Boone,
Chief Financial Officer of Lufkin Industries, Inc.,
+1-936-631-2749; or Jack Lascar, +1-713-529-6600, or Anne Pearson,
+1-210-408-6321, both of DRG&E, for Lufkin Industries, Inc. Web
Site: http://www.lufkin.com/
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