Exhibit 99.1
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| NEWS RELEASE | |  |
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| FOR IMMEDIATE RELEASE | | Contact: | | R. D. Leslie |
| | | | Chief Financial Officer |
| | | | (936) 637-5325 |
LUFKIN INDUSTRIES FIRST-QUARTER 2006 EARNINGS NEARLY DOUBLE TO
$1.01 PER DILUTED SHARE FROM $0.52 FOR THE FIRST-QUARTER OF 2005
Strong Demand Drives Substantial Backlog Growth for All Business Segments
2006 Earnings Guidance Increased to $3.75 to $4.25 per Diluted Share
LUFKIN, Texas — (April 19, 2006) — Lufkin Industries, Inc. (NASDAQ: LUFK) today announced results for the first quarter ended March 31, 2006. Sales for the first quarter grew 31.6% to $133.4 million from $101.4 million for the first quarter of 2005. Net earnings more than doubled to $15.2 million from $7.4 million. Net earnings per diluted share rose 98.1% to $1.01 for the first quarter of 2006 from $0.52 for the first quarter of 2005.
Douglas V. Smith, president and chief executive officer of Lufkin, said, “Lufkin had an outstanding start to 2006, as strong bookings produced comparable-quarter sales growth in all three businesses for the first quarter. The bookings also resulted in an overall backlog of $190.0 million, reflecting both comparable- and sequential-quarter increases in backlog for each business. Our substantial sales growth for the first quarter versus the first quarter of 2005 produced greater economies of scale through increased capacity utilization. Additionally, the relative stability of supply costs provided earnings leverage as indicated by the improvement in the net profit margin, which was 11.4% for the first quarter of 2006 as compared to 7.3% for the first quarter of 2005 and 10.6% for the fourth quarter of 2005.
“Lufkin’s oil field business continued to lead the Company’s growth for the first quarter, with a 38.0% increase in sales to $86.6 million compared with the first quarter of 2005 and a 37.9% increase in backlog to $88.6 million. We attribute this growth to the persistent strength in energy demand worldwide, which has driven sales of pumping equipment for both oil well and natural gas applications. To meet this demand, we have increased production in our domestic and international manufacturing operations, as well as taken additional steps to expand capacity. Sales in our oil field automation and oil field services businesses grew significantly for the first quarter, reflecting efforts by producers to optimize production of existing oil and natural gas operations.
“High energy demand and continued strong industrial markets had a strong positive impact on our power transmission business for the first quarter, which produced sales of $29.6 million, up 33.0% from the first quarter of 2005. Equally significant, the power transmission backlog increased to $67.4 million at the end of the first quarter, up 26.8% from the end of the first quarter last year and up 26.2% from year-end 2005. First-quarter bookings were primarily related to high-speed gears for the energy and power generation markets, as well as increased sales in our power transmission repair
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Lufkin Industries, Inc.¨ 601 South Raguet¨ Lufkin, Texas 75902¨ (936) 634-2211
LUFK Announces First-Quarter Results
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April 19, 2006
and service businesses. Our first-quarter results also benefited from increased demand for low-speed gears used in industrial applications, especially from industries involved in producing and handling commodity materials.
“Sales for our trailer division increased 5.0% for the first quarter of 2006 to $17.2 million, while our backlog increased 63.5% on a comparable-quarter basis to $33.6 million and 32.1% on a sequential-quarter basis. Consistent with our recent experience, these increases were primarily the result of demand for flat bed trailers and dump trailers, as steady economic growth continued to create a favorable environment for housing and road construction and capital goods transportation. The continued strong performance of the flat bed and dump sectors of the trailer markets, as compared to soft van markets, enabled the Company to realize improved gross margins on both a comparable- and sequential-quarter basis.”
Based on Lufkin’s financial and operating results for the first quarter of 2006, its $190.0 million backlog at the quarter’s end and its outlook for the remainder of 2006, the Company today raised its established guidance for earnings per diluted share for 2006 in a range of $3.75 to $4.25. The Company also established its guidance for earnings per diluted share for the second quarter of 2006 in a range of $0.90 to $1.10, compared with $0.71 for the second quarter of 2005. Lufkin’s guidance for 2006 includes the impact of FAS 123R, totaling $0.10 and $0.03 for the full year and for the second quarter, respectively. The pro forma impact on earnings per diluted share for 2005 reflecting the application of FAS 123 totaled $0.07.
Mr. Smith concluded, “The continued strong energy demand accountable for our first-quarter financial results has also created a significant opportunity for Lufkin to enhance its competitive position in the domestic and international oil field and power transmission markets. While we remain fully engaged in ramping production and securing the raw materials to respond to this immediate demand, we are also making investments and building relationships that we expect will strengthen our worldwide presence. Because we clearly recognize the volatile nature of the energy markets, the goal of our expansion strategies will continue to be based on strengthening our ability to achieve sustainable market leadership and long-term growth in earnings and shareholder value.”
Lufkin will discuss its results for the first quarter in a teleconference call today at 9:00 a.m. (central time). To listen to the call, participants should dial (913-312-1297) approximately 10 minutes prior to the start of the call. A telephonic replay will be available from 12:00 p.m. (central time) April 19, through 7:00 p.m. (central time) April 26, 2006, by dialing (719) 457-0820 and entering reservation number 4577356.
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
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LUFK Announces First-Quarter Results
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April 19, 2006
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
(Thousands of dollars, except per share data)
(unaudited)
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| | | Three Months Ended March 31, | |
| | | 2006 | | 2005 | |
Net sales | | $ | 133,389 | | $ | 101,388 | |
Cost of sales | | | 97,949 | | | 78,936 | |
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Gross profit | | | 35,440 | | | 22,452 | |
Selling, general and administrative expenses | | | 12,137 | | | 10,757 | |
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Operating income | | | 23,303 | | | 11,695 | |
Interest and other income (expense), net | | | 395 | | | (70 | ) |
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Earnings before income taxes | | | 23,698 | | | 11,625 | |
Income tax provision | | | 8,531 | | | 4,185 | |
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Net earnings | | $ | 15,167 | | $ | 7,440 | |
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Net earnings per share: | | | | | | | |
Basic | | $ | 1.03 | | $ | 0.53 | |
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Diluted | | $ | 1.01 | | $ | 0.52 | |
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Weighted average shares outstanding: | | | | | | | |
Basic | | | 14,742 | | | 14,031 | |
Diluted | | | 15,070 | | | 14,396 | |
Cash dividends per share | | $ | 0.11 | | $ | 0.09 | |
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LUFK Announces First-Quarter Results
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April 19, 2006
LUFKIN INDUSTRIES, INC.
Balance Sheet Highlights
(Thousands of dollars)
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| | | March 31, 2006 | | December 31, 2005 |
Current assets | | $ | 202,671 | | $ | 189,901 |
Total assets | | | 376,363 | | | 359,795 |
Current liabilities | | | 56,514 | | | 56,273 |
Shareholders’ equity | | | 276,334 | | | 261,079 |
Working capital | | | 146,157 | | | 133,628 |
LUFKIN INDUSTRIES, INC.
Division Performance
(Thousands of dollars)
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| | | | | Three Months Ended |
| | | | | March 31, 2006 | | March 31, 2005 |
Revenue: | | | | | | | | | |
Oil field | | | | | $ | 86,568 | | $ | 62,721 |
Power transmission | | | | | | 29,573 | | | 22,236 |
Trailer | | | | | | 17,248 | | | 16,431 |
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Total | | | | | $ | 133,389 | | $ | 101,388 |
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| | | March 31, 2006 | | December 31, 2005 | | March 31, 2005 |
Backlog: | | | | | | | | | |
Oil field | | $ | 88,636 | | $ | 67,494 | | $ | 64,268 |
Power transmission | | | 67,369 | | | 53,392 | | | 53,117 |
Trailer | | | 33,643 | | | 25,465 | | | 20,573 |
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Total | | $ | 189,648 | | $ | 146,351 | | $ | 137,958 |
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