Commitments and Contingencies

12 Months Ended

Dec. 31, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

(14) Commitments and Contingencies

Legal proceedings:

Intellectual Property Matter

In 2009, the Company brought suit in a Texas state court against the former owners of a business it had previously acquired in order to protect certain of the Company's intellectual property rights. The former owners responded by counter suit against the Company as well as its outside counsel for the acquisition, Andrews Kurth LLP ("AK"), claiming that the Company had improperly acquired title to their inventions. The case was removed from the Texas state court to a U.S. District Court in Midland, Texas in order to address intellectual property and patent issues as well as other claims made by the parties. After reviewing the facts and positions of the parties, in February 2011, the U.S. District Court granted summary judgment for the Company disposing of all federal claims and remanded the remainder of the case back to the Texas state court.

The parties appealed various decisions of the U.S. District Court to the U.S. Court of Appeals for the Federal Circuit, which ultimately dismissed the appeals for lack of jurisdiction and transferred the appeals to the Fifth Circuit in February 2012. In addition to the federal appeals, the plaintiffs asked the Texas state court to proceed with a trial on the remanded case, which set the remanded case for trial over defendants' objections. AK then sought and obtained an injunction from the U.S. District Court prohibiting the plaintiffs from pursuing the Texas state court case until resolution of the federal appeals, which the plaintiffs appealed. In September 2012, the Fifth Circuit ruled in favor of the plaintiffs by vacating the injunction prohibiting the plaintiffs from litigating in state court. Trail in state court was set to begin in March of 2013, while a number of substantive appeals remained before the Fifth Circuit.

On December 10, 2012, the parties entered into a confidential settlement agreement following a successful mediation of all claims between plaintiffs and defendants. Pursuant to the terms of the settlement agreement, Lufkin agreed, among other things, to release all current and future claims arising out of or related to the intellectual property disputes made the basis of the lawsuit in exchange for a corresponding release of claims by plaintiffs.

Upon agreed motions by the parties, the appeals pending before the Fifth Circuit and the state court action were dismissed on January 3, 2013 and January 11, 2013, respectively.

Other Matters

There are various other claims and legal proceedings arising in the ordinary course of business pending against or involving the Company wherein monetary damages are sought. For certain of these claims, the Company maintains insurance coverage while retaining a portion of the losses that occur through the use of deductibles and retention limits. Amounts in excess of the self-insured retention levels are fully insured to limits believed appropriate for the Company's operations. Self-insurance accruals are based on claims filed and an estimate for claims incurred but not reported. While the Company does maintain insurance above its self-insured levels, a decline in the financial condition of its insurer, while not currently anticipated, could result in increased risk. It is management's opinion that the Company's liability under such circumstances or involving any other non-insured claims or legal proceedings would not materially affect its consolidated financial position, results of operations, or cash flow.

Product warranties: The change in the aggregate product warranty liability for the years ended December 31, 2012 and 2011, is as follows:

(Thousands of dollars)	2012			2011
Beginning balance	$	4,847		$	3,620
Claims paid or accrued		(4,714	)		(3,032	)
Additional warranties issued		5,404			4,225
Revisions in estimates		624			67
Foreign currency translation		21			(33	)
Ending balance	$	6,182		$	4,847

Operating leases: Future minimum rental payments for operating leases having initial or remaining noncancelable lease terms in excess of one year as of December 31, 2012 are:

(Thousands of dollars)
2013	$	8,694
2014		7,368
2015		5,006
2016		3,642
2017		2,191
Thereafter		3,353

Expenses for rentals and leases, including short-term rental contracts, were $14.2 million, $9.9 million and $7.8 million for the years ended December 31, 2012, 2011 and 2010, respectively.

Capital expenditures: As of December 31, 2012, the Company had contractual commitments for capital expenditures of $30.8 million that are expected to be paid in 2013.