EX-99.1 2 ex99_1.htm EXHIBIT 99.1 Exhibit 99.1

Exhibit 99.1

 
NEWS RELEASE
    
 
 
FOR IMMEDIATE RELEASE
  
Contact:
  
R. D. Leslie
       
Chief Financial Officer
       
(936) 637-5325
       
 

LUFKIN INDUSTRIES REPORTS RESULTS FOR FOURTH-QUARTER 2006
Establishes 2007 Earnings Guidance in a Range of $4.40 to $5.30 per Diluted Share

LUFKIN, Texas -- (Feb. 15, 2007) -- Lufkin Industries, Inc. (NASDAQ: LUFK) today announced financial results for the fourth quarter and twelve months ended December 31, 2006. Sales increased 14% for the fourth quarter to $165.6 million from $145.4 million for the fourth quarter of 2005. Net earnings were $23.0 million, or $1.52 per diluted share, for the fourth quarter of 2006, which included a net benefit of $0.26 per diluted share comprised of a benefit of $0.30 per diluted share associated with the finalization of various tax estimates and tax initiatives and an estimated cost of $0.04 per diluted share to dispose of inventories and fixed assets related to its previously announced strategic decision to exit the trailer van business. In addition, fourth-quarter 2006 results included a $0.02 per diluted share cost related to SFAS 123R (Expensing of Stock Options). Net earnings for the fourth quarter of 2005 were $15.4 million or $1.03 per diluted share.

Sales for 2006 increased 23% to $605.5 million from $492.2 million for 2005. Net earnings for 2006 were $73.0 million, or $4.83 per diluted share, which included the net $0.26 per diluted share benefit discussed above and a SFAS 123R cost of $0.12 per diluted share. Net earnings for 2005 were $44.5 million or $3.03 per diluted share.

Douglas V. Smith, president and chief executive officer of Lufkin, commented, “Lufkin produced solid operating results for the fourth quarter of 2006, contributing to a year of strong profitable growth. We were pleased with the our top-line performance for all three of our businesses for the fourth quarter, as the combination of sales and backlog left us well positioned in each segment for 2007. In addition, the greater availability and cost stability of raw materials and reduced inefficiencies related to capacity expansions enabled us to produce stronger operating leverage for the quarter and improved profit margins, on both a comparable-quarter and sequential quarter basis.

“Lufkin’s oil field division continued to operate at a high level for the fourth quarter. Sales increased 17% from the fourth quarter of 2005 and were slightly below the level for the third quarter of 2006. Our ability to produce the pumping equipment related to these sales resulted from capacity expansions in our manufacturing facilities in the U.S., Canada and Argentina during 2006. The resulting output from the expansion exceeded new order intake for pumping units in this quarter. These expansions also enabled us to reduce our backlog to $67.1 million at year end from $79.7 million at the end of the third quarter of 2006, again returning our order-to-shipment cycle to a more acceptable range. Our oil field results for the fourth quarter and the full year also reflected strong demand and substantial profitable growth in our automation and services businesses, as well as a high rate of capacity utilization at our foundry operations, primarily driven by internal needs.

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Lufkin Industries, Inc. w601 South Raguet w Lufkin, Texas 75902 w (936) 634-2211
 

LUFK Announces Fourth-Quarter Results
Page
Feb. 15, 2007
 
“Strong demand in energy related business and steady economic growth also drove our power transmission business results for the fourth quarter. While sales increased 1% from the fourth quarter of 2005, the segment’s growing momentum was evident in the 79% increase in backlog to $95.6 million at the end of 2006 from year end 2005. In addition, sales and backlog each grew 17% sequentially from the third quarter of 2006. The power transmission results were driven by demand across product, service and geographic lines.

“The results for the Company’s trailer business were affected by the decision to exit the highly competitive trailer van business and increase production capacity of dump and flatbed trailers with a portion of the available production capacity. Strong demand for these higher margin trailers, as well as the completion of the trailer van backlog, led to a 21% increase in trailer sales for the fourth quarter compared with the fourth quarter of 2005 and a 16% sequential-quarter increase. Our trailer backlog at the end of the year declined due to the absence of trailer van bookings compared with both the fourth quarter of 2005 and the third quarter of 2006.

“Looking forward to 2007, we expect demand to remain significant in all three of our divisions,” added Mr. Smith. “While the decline in energy prices beginning in late 2006 has lessened the intensity of demand in our oil field business, it has enabled more optimal management of our backlog, supplies and capacity, creating a more sustainable operating environment. Supporting this environment, the economic expansion is continuing in the U.S. and in many of our international markets, which enhances the near-term growth prospects of all our businesses.”

As a result of the Company’s outlook for 2007 and its $181.1 million backlog at the end of 2006, the Company today established its guidance for earnings per diluted share for 2007 in a range of $4.40 to $5.30. The Company’s outlook does include some allowance for the uncertainty of oil prices. The Company also established its guidance for earnings per diluted share for the first quarter of 2007 in a range of $0.95 to $1.15, compared with $1.01 for the first quarter of 2006.

Mr. Smith concluded, “Lufkin’s people and its business model have demonstrated their ability to respond with flexibility and innovation to the challenges created by volatile prices for energy and other commodities and from changes in the economic environment. To counter the effects of such volatility, we will continue to focus our efforts on the steady strengthening of our positions of market leadership through the implementation of consistent growth strategies over the long term, while maintaining the financial and other resources to respond to new challenges and opportunities. Our experience has shown that through this long-term approach, we are insulated from the full impact of weaker phases in industry and economic cycles, while remaining well positioned to leverage better conditions to drive increased shareholder value.”

Lufkin will discuss its results for the fourth quarter in a teleconference call today at 9:00 a.m. (central time). To listen to the call, participants should dial (913-981-5592) approximately 10 minutes prior to the start of the call. A telephonic replay will be available from 12:00 p.m. (central time) February 15, through 7:00 p.m. (central time) February 22, 2007, by dialing (719) 457-0820 and entering reservation number 7554807.
 
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LUFK Announces Fourth-Quarter Results
Page 3
Feb. 15, 2007
 
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. 

Lufkin Industries, Inc. sells and services oil field pumping units, foundry castings, power transmission products and highway trailers throughout the world. The Company has vertically integrated all vital technologies required to design, manufacture and market its products.

LUFKIN INDUSTRIES, INC.
Financial Highlights
(In thousands, except per share data)
(unaudited)

   
Three Months Ended
  
Twelve Months Ended
  
   
December 31,
  
December 31,
  
   
2006
  
2005
  
2006
  
2005
  
Sales
  
$165,611
  
$145,410
  
$605,492
  
$492,167
  
Cost of sales
    
122,639
    
110,934
    
449,243
    
378,826
  
Gross profit
   
42,972
    
34,476
    
156,249
    
113,341
  
Selling, general and administrative expenses
    
14,793
    
10,827
    
52,994
    
44,135
  
Operating income
    
28,179
    
23,649
    
103,255
    
69,206
  
Interest and other income (expense), net
    
190
    
33
    
1,474
    
69
  
Earnings before income taxes
    
28,369
    
23,682
    
104,729
    
69,275
  
Income tax provision
    
5,391
    
8,318
    
31,735
    
24,731
  
Net earnings
  
$
22,978
  
$
15,364
  
$
72,994
  
$
44,544
  
                           
Net earnings per share:
                          
Basic
  
$
1.54
  
$
1.05
  
$
4.92
  
$
3.10
  
Diluted
  
$
1.52
  
$
1.03
  
$
4.83
  
$
3.03
  
Weighted average shares outstanding
                          
Basic
    
14,909
    
14,670
    
14,845
    
14,370
  
Diluted
    
15,157
    
14,979
    
15,123
    
14,686
  
Cash dividends per share
  
$
0.18
  
$
0.11
  
$
0.62
  
$
0.38
  
 
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LUFK Announces Fourth-Quarter Results
Page 4
Feb. 15, 2007

LUFKIN INDUSTRIES, INC.
Balance Sheet Highlights
(Thousands of dollars)

   
Dec. 31,
  
Dec. 31,
  
   
2006
  
2005
  
Current assets
  
$
243,452
  
$
189,901
  
Total assets
    
429,069
    
359,795
  
Current liabilities
    
61,495
    
56,273
  
Shareholders’ equity
    
328,140
    
261,078
  
Working capital
   
181,957
    
133,628
  

 
LUFKIN INDUSTRIES, INC.
Division Performance
(In thousands)

   
Three Months Ended
  
Twelve Months Ended
  
   
Dec. 31,
  
Dec. 31,
  
   
2006
  
2005
  
2006
  
2005
  
Sales:
                  
Oil field
  
$
108,308
  
$
92,324
  
$
401,200
  
$
307,075
  
Power transmission
    
34,691
    
34,441
    
124,922
    
106,616
  
Trailer
    
22,612
    
18,644
    
79,370
    
78,476
  
Total
  
$
165,611
  
$
145,409
  
$
605,492
  
$
492,167
  

   
Dec. 31,
  
Sept. 30,
  
Dec. 31,
  
   
2006
  
2006
  
2005
  
Backlog:
              
Oil field
  
$
67,145
  
$
79,707
  
$
67,494
  
Power transmission
    
95,571
    
81,813
    
53,392
  
Trailer
    
18,396
    
31,718
    
25,465
  
Total
  
$
181,112
  
$
193,238
  
$
146,351
  


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